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Can Global Shipping Be Fixed? One Regulator Will Try.

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Daniel B. Maffei is at once a crucial player in the campaign to subdue inflation, and a figure virtually unknown outside the confines of his wonky Washington domain.

He’s the chairman of the Federal Maritime Commission, a small, traditionally obscure institution that has been thrust into a central role in the Biden administration’s designs on taming soaring prices — a menace that could determine which party next controls Congress.

The commission regulates the international shipping industry at American ports, an element of modern life that is typically ignored but has emerged as a reason major retailers are short of popular goods, and why people renovating homes are waiting months for doorknobs.

Nine container shipping carriers — all of them foreign companies — dominate the market for moving goods between Asia and North America. For more than a year, the industry has been besieged by chaos, from traffic jams choking ports to a shortage of truck drivers impeding efforts to move cargo. With containers stuck on ships and stacked on docks, shortages and rising prices have become central features of these times.

The ocean carriers have multiplied their shipping rates and imposed a bewildering assortment of fees. The container shipping industry is on track to make $300 billion in profits before taxes and interest, according to Drewry, an industry research firm.

The White House has seized on these two realities — soaring prices, and record profits for carriers.

“One of the reasons prices have gone up is because a handful of companies who control the market have raised shipping prices by as much as 1,000%,” President Biden declared on Twitter in June. “It’s outrageous — and I’m calling on Congress to crack down on them.”

Days later, he signed into law the Ocean Shipping Reform Act, which is engineered to bolster the maritime commission’s authority.

The president handed Mr. Maffei, a former member of the House of Representatives from central New York State, primary responsibility for taking on a major culprit in his narrative on inflation.

In contrast to the colonnaded fortresses of most of official Washington, the maritime commission occupies two floors of a nondescript office building. It commands an annual budget of just $32 million, even as the agency is now tasked with taking on a collection of ocean carriers whose profits exceed 9,000 times that amount.

Mr. Maffei, a Democrat who represented a highly contested congressional district, presents himself as a centrist and pragmatist. As the bearer of three Ivy League degrees — Brown undergrad, Columbia journalism school and Harvard’s John F. Kennedy School of Government — he brings an analytical bent that tends toward shades of gray, not the colorful vernacular of political denunciation.

Yet the president has handed him a resolutely populist mission: Apply force to remedy what Mr. Biden describes as a “rip-off” of American consumers.

Mr. Maffei acknowledges the difficulties of the terrain.

“There is a rip-off,” he says. “But explaining where the rip-off is doesn’t fit easily into a quick speech.”

As he describes it, higher shipping rates are largely the product of market forces. Americans confined by a pandemic ordered astonishing quantities of goods from factories in Asia. Demand overwhelmed the supply of container vessels, pushing up prices.

Mr. Maffei diverges from the White House on its contention that higher shipping costs are primarily the result of monopoly power amassed by ocean carriers.

Three alliances of shipping companies control 95 percent of routes across the Pacific, according to the International Transport Forum, an intergovernmental body based in Paris. As shipping prices have soared, and as delays have besieged ocean transit, retailing giants like Amazon and Walmart have chartered their own vessels, prompting complaints from smaller importers that they are at an unfair disadvantage.

Mr. Maffei expresses concern about market concentration, but also resignation that enormous companies are an inevitable outgrowth of American economic forces after decades of deregulation.

“The small and medium-sized folks are boxed out,” he says. “That’s capitalism.”

But the chairman smells foul play in the fees that ocean carriers levy on American importers — so-called detention and demurrage charges for containers that sit uncollected or go unreturned, even when truck drivers are denied access to ports; congestion surcharges; and fees for “premium” and even “superpremium” services.

The new Ocean Shipping Reform Act — vigorously sought by Mr. Maffei — details an unambiguous plan of attack.

The commission has six months to write rules aimed at forcing shipping carriers to transport more American exports. That’s a redress to complaints from farming interests that carriers have largely forsaken them, depriving them of a way to ship exports while giving priority to the more lucrative import trade.

The law directs the agency to bulk up enforcement while creating systems that make it easier for aggrieved shippers to file complaints. It increases the agency’s funding 50 percent by 2025.

As the chairman portrays it, the details of the law matter less than the fact that Congress has mustered action, sending a warning to recalcitrant ocean carriers.

“Deterrence is what it’s about,” Mr. Maffei says. “On a day-to-day basis, we’re too small an agency. We’re never going to catch every instance.”

The passage of the law has already had an impact, say exporters, prompting ocean carriers to make more containers available at West Coast ports. It has also changed perceptions about the commission’s once-cozy dealings with the carriers.

“They became hostage to the industry,” says Peter Friedmann, a former Capitol Hill aide who heads the Agriculture Transportation Coalition, an advocacy and lobbying organization. “The commission has really turned the corner.”

The changed tone was reflected in the blistering note of protest unleashed by the World Shipping Council, an industry lobbying group, on the day Congress passed the new law.

“We are appalled by the continued mischaracterization of the industry by U.S. government representatives,” the statement declared, condemning a “disconnect between hard data and inflammatory rhetoric.”

For now, the industry is in schmooze mode, sending delegations to meet the chairman, other commissioners and members of Congress. With headquarters in places like China, South Korea, Taiwan and Denmark, the carriers — many of them state-owned — are unaccustomed to having to grasp the odd workings of American politics.

Mr. Maffei offers himself as a voice of reason, the seeker of the middle path in an age of politicized blame.

That Mr. Maffei, 54, is even on the commission seems a quirk of happenstance.

Raised in Syracuse, N.Y., he never saw the ocean until he was 11. He worked as a local television reporter before going to Washington to work for Senators Bill Bradley and Daniel Patrick Moynihan, followed by a stint on the staff of the powerful House Ways and Means Committee.

In the summer of 2015, having lost his bid for re-election, Mr. Maffei found himself casting about for the next phase of his career. He did not want to be a lobbyist. He approached friends in the Obama administration seeking counsel.

They told him about an open seat on a commission. His ears pricked up. The Consumer Product Safety Commission? That could be interesting. No, they told him, the Federal Maritime Commission.

“I said, ‘Well, OK, I think I’ve heard of them,’” Mr. Maffei recalls. “‘I’m already ahead of the game.’”

He took a seat in July 2016 and was reappointed by President Donald J. Trump. When Mr. Biden took office, he elevated him to chair of the five-member body.

On a recent morning, Mr. Maffei enters the commission’s offices just before 9, wearing a New York Yankees baseball cap and a brown polo shirt. He rides the elevator to the 10th floor and enters his capacious suite, which is adorned with models of giant container ships and antique maritime clocks. He changes into a dark blue suit and a tie decorated with a maritime anchor pattern.

The morning’s commission meeting quickly descends into fiasco. The chairman assumes his place on a wooden dais, facing an audience of two dozen people — mostly lawyers and lobbyists representing shipping companies. A few minutes in, he learns that others watching the proceeding remotely cannot hear the audio, so he adjourns the session while waiting for a corrective that never comes.

“We’ve been trying to get the hearing room fixed,” Mr. Maffei says. “You can tell it’s kind of old.”

He conducts the meeting from his office, via a clunky videoconferencing platform that is rife with delays. He uses a thick bound volume of maritime regulations to prop up his laptop. He wields his coffee mug as a gavel.

Members of his staff detail the new law, section by section. They are investigating reports of noncompliance by ocean carriers while recruiting enforcement staff.

“This is the law of the land,” Mr. Maffei declares. “If you have a complaint about it, we can direct you to the Congress or the White House.”

After lunch in a conference room with his staff — roast chicken from a nearby Peruvian restaurant — he meets behind closed doors with a delegation representing a carrier based in France.

Then he calls Bethann Rooney, the head of the Port of New York and New Jersey, the largest container shipping hub on the East Coast.

In a tone of weary indignation, she briefs him on the mayhem besieging her facilities.

The port is running out of places to stash containers, because the docks are crammed with more than 200,000 empties. The carriers are not sending enough ships to collect them, she says, preferring to deploy their vessels to Asia to bring more imports.

Everything is backed up. Local truck drivers cannot get appointments to return containers, yet carriers are charging them fees for holding on to boxes.

Mr. Maffei absorbs this while sitting in a wingback chair, facing a wall bearing an oil painting by a 17th-century Dutch artist displaying two ancient sailboats caught near rocks in crashing surf.

Would it be helpful for him to visit the port? His presence could signal to the carriers that they must take action.

Yes, Ms. Rooney says. A visit could not hurt.

The next week, under a pounding summer sun, Mr. Maffei arrives at the port administration building in Newark as tractor-trailers rumble by, hauling clattering containers to and from the docks.

Inside a conference room, he walks a slow turn around a long table, shaking the hands of the dozen people assembled, the heads of local trucking companies.

The truckers are seething with disgust over the fees they must pay for holding containers — up to $150 per day per box. The carriers will not release their cargo until invoices are paid. This is ransom, one says.

“Our port is gridlocked,” complains Tom Heimgartner, chairman of the Association of Bi-State Motor Carriers, which represents local trucking firms. “It’s an emergency. We need something done here.”

Mr. Maffei listens earnestly, a study in constituent service, while jotting notes in a pocket-size journal.

The truckers urge him to force the carriers to place a moratorium on fees until the congestion is resolved.

The commission lacks the authority to do that, Mr. Maffei explains. But the carriers could agree to one voluntarily. He and other commissioners could apply pressure on them.

He says the carriers appear to be violating the shipping act in effectively forcing truckers to store their containers without compensation — a potential avenue for enforcement.

But the truckers would need to lodge formal complaints at the commission.

Traditionally, truckers have been reluctant to file cases for fear of angering the carriers. Perhaps the atmosphere of contempt has changed that calculation.

“It sounds like they are treating you like such dirt,” Mr. Maffei says. “I’m not sure you have anything to lose.”



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SEC chair Gary Gensler rushing to unveil big changes amid FTX scandal

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You would think that with the FTX scandal still brewing and investors missing billions of dollars from their supposedly secured crypto accounts, Securities and Exchange Commission chair Gary Gensler would have so much on his plate, he wouldn’t have time to muck around in our capital markets, which are working just fine.

But sources tell me Gensler is doing just that — preparing to unveil plans for the biggest changes in about two decades to the way stocks are routed from buyers to sellers. If Gensler’s timing holds, he will announce (possibly this week) an open meeting for mid-December that will detail his plan to remake the nation’s $46 trillion stock market, as I first reported on Fox Business.

The idea is to jam out his proposed changes — and they’re pretty significant — before year’s end.

Why the rush? The word inside the SEC is that Gensler wants to get much of the work on it done before the new GOP Congress takes over Jan. 3. While a probe of Hunter Biden’s swampy business dealings is high on the list of the incoming committee chairs, Gensler knows he also has a target on his back for his ambitious — some would say zealous — progressive agenda at an agency that has a core mission of protecting investors from being ripped off by scammers.

The Gensler SEC has moved so far beyond this mission that he’s looking to score lefty points and join the Environmental Social Governance bandwagon by forcing companies to disclose non-financial metrics such as how they are reducing their carbon footprint.

The House Financial Services Committee, meanwhile, is intent on grilling Gensler on what he knew about the shenanigans of Sam Bankman-Fried, the Democratic megadonor under criminal investigation over the implosion of the crypto exchange FTX. The company is now in bankruptcy, while SBF, as he’s known, remains in the Bahamas.

Securities and Exchange Commission, Chairman Gary Gensler testifies before a Senate Banking, Housing, and Urban Affairs Committee hearing on "Oversight of the U.S. Securities and Exchange Commission" on Tuesday, Sept. 14, 2021, in Washington.
If Gensler’s timing holds, he will announce (possibly this week) an open meeting for mid-December that will detail his plan to remake the nation’s $46 trillion stock market
Bill Clark/Pool via AP

Billions missing

As this column goes to press, countless billions in customer money remain missing, likely gambled away in Bankman-Fried’s side hustle of a prop-trading fund.

Here’s where things get interesting: Gensler met with SBF months before the blowup. The SEC had additional meetings with the fallen crypto bro’s people and business partners who were looking to start a commission-approved exchange. GOPers want to hear how all this occurred ­under the nose of Wall Street’s ­so-called top cop.

Market structure, meanwhile, hasn’t really caught the full attention of the incoming 118th Congress and its new GOP majority yet, but it should. The way we buy and sell stocks, the so-called plumbing of the market, is often taken for granted for the simple reason that it works pretty seamlessly even if the process is pretty complex.

It’s more complicated than just a bunch of guys on the New York Stock Exchange screaming out bids to match buyers and sellers.

For starters, most of those guys are gone, replaced by computers that can match orders in nanoseconds. The main public stock markets, the NYSE and the Nasdaq, aren’t the only game in town and are in competition to match buyers and sellers with private exchanges and market makers, companies like Citadel Securities and Virtu Financial. They’re armed with highly efficient trading machines that can match orders cheaply and still skim a bit and make a profit. It’s why we have low-cost and, in the case of Robinhood, no-fee trading platforms.

The system isn’t perfect, of course (see what happened during the early stages of the so-called meme-stock craze of 2020-21). There are outages and price discrepancies due to computer errors. But it works pretty well, and by most measures small investors benefit greatly from better execution and lower trading costs — just the way the SEC intended the last time it instituted changes.

FTX founder Sam Bankman-Fried
Sam Bankman-Fried is under criminal investigation over the implosion of the crypto exchange FTX.
FTX/Handout via REUTERS/File Photo

Anything can be improved — but should it?

The main thrust of Gensler’s proposal, according to people briefed on it, could cost retail investors billions of dollars. I don’t have all the details, but broadly he wants trades made by small investors to be routed separately into various public auctions, presumably run by the NYSE or Nasdaq — a change that would significantly reduce competition that the SEC intended. His hypothesis is that there’s nefarious stuff going on in those private venues where ­rip-offs might be going down.

What are those rip-offs? Gensler hasn’t really said. Do we have evidence that cheap or no-fee discount brokers are covering up hidden costs on execution performed by market makers? No.

Looking for headlines

So why is Gensler looking to fix what isn’t broken? Some people in the markets say he’s merely looking for headlines and to curry ­favor with the Wall Street-hating progressive Sen. Elizabeth Warren, who has a big say in President Biden appointments for economic roles in the administration. Gensler is eyeing treasury secretary when Janet Yellen steps down next year as expected.

Others say he really does think Wall Street is a sewer of corruption. Maybe we will find out more at the SEC’s next open meeting, or maybe Gensler will drop his fixation with fixing something that’s not broken and realize his time is better spent finding those countless billions still missing from those FTX customer accounts.

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World Cup fans choose party city Dubai over buttoned-down Qatar

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Football fan Chris Leek was born in 1958, the last time Wales qualified for the Fifa World Cup. “All I ever wanted was to see Wales in the World Cup — now I can be happy for the rest of my life,” he said of the principality’s participation in this year’s tournament in Qatar.

Leek plays alto saxophone with The Barry Horns, a brass band made up of 11 Welsh football fans. Seven of them have travelled to the Gulf to play at Wales’ matches in Qatar, not only to try to galvanise the crowd with their music but also to promote Welsh identity and independence from the UK.

But like thousands of other supporters, they have based themselves in nearby Dubai, the regional trade hub in the United Arab Emirates, making the tiring day-long trip to the Qatari capital Doha via hour-long shuttle flights connecting the cities during the tournament.

Fans from the participating countries have opted for Dubai’s lively nightlife scene over Doha’s buttoned-down atmosphere. Qatar’s last-minute decision to ban alcohol sales around the stadiums only served to underline the country’s more conservative culture.

The party atmosphere starts at Dubai’s two airports, where outlets have been so busy this week that some ran out of McDonald’s and Heineken beer.

Football fans watch a match between Argentina and Saudi Arabia on a large screen, at a fan zone in Dubai, United Arab Emirates © Hussein Malla/AP

Across the city, fan zones have been bustling with supporters from every nation, reflecting the diverse nature of Dubai’s expatriate population, which makes up 90 per cent of the 3.5mn population.

In the downtown financial centre, bankers have been swapping suits for football shirts to watch matches at its fan park, where companies have been renting out lounges at $5,500 for 20 people, which includes food and booze.

With 60 daily shuttle flights between Dubai and Doha, up to 350,000 people could be transported from the region’s tourism hub throughout the tournament, which expects to host about 1.5mn visitors.

The deluge of fans comes in the middle of Dubai’s tourism season, when visitors flock there in search of winter sun. The government-owned airport operator says passenger throughput has eclipsed pre-pandemic numbers, with traffic surpassing 6mn a month during the third quarter. Dubai’s Emirates airline has recorded a 228 per cent rise in passengers in its first-half results.

“Dubai has extremely strong demand at this time of year and I’m sure there will be people travelling through Dubai to the World Cup,” said Issam Kazim, chief executive of Dubai Tourism. “This tournament will be a boost for the entire region.”

But officials say the number of fans who are visiting the emirate with the sole purpose of catching games in Qatar is likely in the low tens of thousands, or the equivalent of an uptick in hotel occupancy of up to three percentage points. Many match tickets have been sold to expatriates in the Gulf, including some of the 100,000-plus Britons living in the UAE.

Many hotels are now operating at near full capacity anyway as travel demand has soared. In September, the last available statistics, average occupancy at the roughly 140,000 available rooms across the emirate was 71 per cent with the average daily rate around a quarter higher than 2019.

Dubai-based Expat Sport has brought in about 2,000 fans through its hotel and flight packages for supporters who have tickets to attend games in Qatar. Fans from South America, India and the UK are staying in the popular Palm Island district of Dubai, shuttling to and from Qatar on flights booked by the company, which also sells World Cup hospitality packages for UAE-based expatriates.

“There’s general excitement, it’s suddenly here,” said Sue Holt, executive director of the sports tourism group. “People who weren’t thinking about it are saying ‘why don’t we just go’.”

For visitors such as The Barry Horns’ founder Fez Watkins, Dubai also offered a chance to visit “amazing” clubs where the blend of south Asian and Arabic-influenced rhythms was “absolutely, mind-blowingly good”.

Local well-wishers have been lending the band sound equipment and drums for the matches in Doha as well as their gigs for expatriate enthusiasts at hotels and events at the British embassies in Qatar and Dubai.

The group, formed in 2011 when the national team’s fortunes were at a low point, plays tunes such as the military march “Men of Harlech” and Depeche Mode’s “Just Can’t Get Enough”, to raise the morale of the “Red Wall” of Welsh fans decked out in national colours and bucket hats.

“There have been a few hassles, but it’s been great overall — arriving at the airport with the fans from likes of Mexico and Argentina has been a joyful World Cup experience,” said Watkins.

“The World Cup has always been like a party we were never invited to. And now we’re finally part of it.”

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Whole Foods upsets Maine politicians with decision to stop selling lobster

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Whole Foods’ decision to stop selling Maine lobster has been cheered by environmental groups, but made politicians steaming mad.

The high-end grocery giant took lobster from the Gulf of Maine off the menu at hundreds of its stores nationwide, citing a pair of sustainability organizations yanking their support for the US lobster fishing industry.

The organizations, the Marine Stewardship Council and Seafood Watch, said they were concerned about the risks fishing gear posed to the endangered North Atlantic right whales. The whale population is estimated to be around 340.

The decision, revealed last week, has drawn ire from Maine, which boasts the nation’s largest lobster fishing industry.

In a joint statement, Gov. Janet Mills and the state’s four congressional legislators voiced their concern about the impact on local fishermen’s livelihoods and defended the state’s fishermen, saying they’ve been committed to sustainability and protecting right whales.

Whole Foods cited a pair of sustainability organizations yanking their support for the nation’s lobster fishing industry in their decision to stop selling the crustacean.
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“The Marine Stewardship Council, with retailers following suit, wrongly and blindly decided to follow the recommendations of misguided environmental groups rather than science,” the politicians said.

Whole Foods said that it is “committed to working with suppliers, fisheries, and environmental advocacy groups as [the situation] develops.”

With Post wires.

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