Q&A: Cary Davis, American Association of Port Authorities President and CEO-elect

In late August, the American Association of Port Authorities (AAPA) announced that its Board of Directors announced that, effective October 1, Cary Davis will become its new President and CEO. Davis will replace Chris Connor, whom announced his departure from AAPA earlier this year. Davis joined AAPA in November 2019 and has played key public policy roles for the organization in his roles as VP of Government Relations, General Counsel and Board Secretary.LMGroup News Editor Jeff Berman recently caught up with Davis to discuss his new role, his vision for AAPA, and various other topics. Their conversation follows below.

Logistics Management (LM):You've been with the AAPA for a few years already. And now, effective October 1, you will formally step into your new role as CEO of the AAPA. What are sort of your objectives, or goals, for you in your new role, and for AAPA in general, when you step into your new position?

Davis:It is a great honor and privilege to work with seaports across the entire hemisphere in that new role. Being fierce, unwavering storytellers on behalf of—and advocates for—the needs of the support system is our reason for being. I came up through AAPA in that function, so, I'm steeped in it. As we've said for years, public policy advocacy is the sharp edge of the knife for why AAPA exists on behalf of U.S. seaport members. Beyond that, we know that many of the conversations about port operations, industry trends, funding, and policy are all common across Canada, U.S., Latin America, and the Caribbean. So, many of those topics, whether they're looking at how the United States federal government is approaching them, or the industry's needs, are common areas of conversation and collaboration across the entire hemisphere for our international board members.

LM:When we look at sort of the current state of ports and maritime and ocean cargo shipping, what are some of the things that are jumping out to you whether it is on a year-to-date basis or compared to last year this time? How do you sort of assess or view the current state of things?

Davis:它是一把双刃剑。在有关方面, we’re clearly in a down period, measured against any baseline as established during the surge period. The Fed continues to indicate that it's going to put a crimp on things because its overall concerns with inflation are still there, and I will come back to that point. The output that we're seeing from our major trading partners in China, Germany, and Japan is concerning. And throughput numbers are just down. I try to find a positive story, at least in the immediate term, to tell about what's happening in ports and that is in Q2/Q3 2023, the runaway inflation numbers in the transport sector finally turned negative. Irrespective of what the Fed is looking at with overall economic inflation, I would argue we've done our job in taming the bottleneck issue and in seriously giving relief to shippers when it came to freight rates. Again, a double-edged sword, overall negative picture, with some rays of light that are a testament to the hard work of the industry.

LM:The rate environment was just painstaking to say the least, especially early on during the pandemic, and then we saw the heavy congestion, especially the outside Los Angeles and Long Beach and other places, too. It is fair to say things pretty unusual, or, atypical to say the least, right?

Davis:Transport costs and supply chain pressures and the like were the number one driver of overall inflation, which is why I'd like to dig into what the Fed is looking at to say that inflation still exists. Perhaps they're looking outside the U.S. with those types of concerns. And it's also why I was proud of what our industry was able to do to mitigate the supply chain pressures and bring down what had been for a while runaway inflation.

LM:How do you assess the 2023 Peak Season?

Davis:Any individual port or regional economic block is going to care a lot about Peak such as it is, because that's going to that's going to dictate their economic outlook and economic success for the year. As the as the national and international trade association, we certainly track those figures and we certainly try to understand how inventory management, which is clearly changing, as are behaviors, is going to bear on the overall business and freight cycle. But I would say we, in really trying to tease out lessons learned from the pandemic, pay way more intention attention to supply chain management, as it affects space within the port complex. What am I really driving at here? Many shippers and BCOs were essentially using port space as free warehousing during the pandemic for various reasons: lack of warehousing supply; bullwhip effects affects in consumer demand; and ultimately, contractual- and policy-based constraints on the levers that ports and terminal operators had to induce cargo to move off the docks. I would argue this phenomenon led to many of the backups. That is, ports were backed up, because shippers refused to move their cargo off the dock. When we're talking about business trends, such as Peak, we want to look at metrics like dwell time. That's going to be a sort of major benchmark, or standard, that we're looking at from a national and international macro supply chain perspective, as opposed to what are the throughput numbers looking like this year versus last year. When you look at that, things like dwell time are going to be the major metrics that we want to look at because of lessons learned from the pandemic.

我们also going to want to look at things like blank sailings, which is yet another metric that we learned is extremely important from the pandemic, because I'm not going to make it seem like we're keeping all of the blame on the shippers; there is no one party to blame, but, of course, carriers have responsibility here, too, because whether it's importers’ ability to get their stuff into the country, or the need for U.S. exporters to have the backhaul supply, blanking of sailings is really going to affect the customers of the ports.

LM:Let's shift gears for a moment and talk a bit about port-related infrastructure developments. How would you describe the current state of things?

Davis:Our policymakers in the U.S. and for our neighboring partners are totally aware and focused on the role and need for government assistance, when it comes to infrastructure modernization and capacity expansion. The Bipartisan Infrastructure Law and the Inflation Reduction Act were two huge pieces of evidence for that. But, of course, we also look at the year-on-year annual appropriations that Congress does for all of the infrastructure funding programs through the government, many of which are at the U.S. Department of Transportation, much of which is at the U.S. Army Corps of Engineers for dredging, more and more of which is at the Department of Homeland Security for securing the critical infrastructure that our ports. The big takeaway is a clapping hands emoji for our policymakers. It was a running joke in Washington for many years that politicians’ attempts at creating an “Infrastructure Week” kind of just fizzled out. But now we're truly in an infrastructure decade, where there's real money on the table and smart ways that ports, states, municipalities, counties, and municipal planning organizations, are all planning for increased levels of freight over the next decades, as well as innovative ways to include technology in port infrastructure and also partnering with inland freight facilities to be able to move cargo more easily from the congested coastal areas to inland areas, whether they're transloading, facilities, warehousing, distribution, or e-commerce hubs. There's a lot happening when it comes to infrastructure investments in and around the ports.

If we really want to maximize the bang for our buck, and prove to these policymakers that I applauded earlier that their decisions about making capital available for ports and increasing and modernizing the system and increasing the capacity has all been worth it, then it's incumbent on industry to work collectively and to work with the government for holistic freight planning so that we spend the dollars wisely. To this point, I recently visited with all of our Canadian ports to talk about this very thing. The Canadian government, just like the U.S. government, wants to take national freight planning more seriously, so I talked with them about some best practices that we've been able to develop in the U.S. and also about the interconnectivity of our economies and how you may get a Canadian widget coming across the border to the U.S. being input in a U.S. train, for example, and then being re-exported back to Canada. It's a highly integrated economy. So, getting this all out on paper, in a hemispheric-free plan, is going to make sure we're getting the highest ROI for all of this funding that's available.

LM:What is the current state of the Harbor Maintenance Trust Fund?

Davis:Yet again, Congress has really stepped up to the plate in reforming and expanding the Harbor Maintenance Trust Fund. What do I mean? Through the CARES Act, which was a pandemic relief bill, of all things, and through the Water Resources Development Act of 2020, we were able to unlock a large balance of funds that had built up in the Harbor Maintenance Trust Fund, so that that balance is being spent back out on the dredging needs of the industry. And we were also able, through the industry's collective advocacy, and through the heroism of Congress, to create a much more equitable formula that the fund spending is based on, so a lot more work that needs to be done. There's such a long institutional history of spending these dollars on “traditional dredging needs,” that we have some historical and cultural hurdles to get over with the government to show them what spending on expanded uses and expanded geographies really looks like. But we've made huge strides.

LM:Let’s talk about the Ocean Shipping Reform Act. What do you think been the material gains, or benefits, of it for the sector, specifically for ports?

Davis:Ports benefit when their customers benefit. And customers, namely, shippers, namely, great American companies, that are doing importing exporting, and their trading partners, benefited from this bill, which AAPA was instrumental in crafting; and our support was critical for getting it over the line in Congress and getting the President to sign it. What do I mean by that? Making sure that shippers had redress if and when there was ever imperfect behavior by those carrying their goods, was a really good success of the system, and was a really good success of the legislation. And we were able to ensure that those types of fluidity incentives that ensure that the shippers are not using tarmac space as free warehouse and was also a really important facet of the final legislation. We continue working with the government as they put the details in the rules of the road, in terms of how the transport providers can contract with and build with the shippers—there's still a lot to be done there. But ultimately, getting more access to the system, and especially ensuring that U.S. exporters were being given vessel space were really good successes of the legislation.

LM:If you were to assess sort of the current state of the supply chain, there's been been a lot of stops and starts, but are we on a path back to normalization or do we have more to go?

Davis:我回到我前面提到的,这是the numbers don't lie and inflationary pressures in transport have not only stabilized but they've turned negative. So, while that creates its own set of problems, I would argue that that is fairly strong evidence that the gordian knot of the supply chain crunch has been cut through. Yet, we continue to see other sorts of challenges and choke points in the supply chain, which include the ongoing decoupling from Chinese trade, the water levels and backups at the Panama Canal, the major shifts in business locations and our populations across the hemisphere, many of which were driven by pandemics but, of course, we have people moving to business-friendly regions of the country and the hemisphere. We have allied shoring to many of our Latin American trading partners. We have a newly renegotiated USMCA, or NAFTA, which is also causing modest shifts in supply chains across the hemisphere. So, the backup challenges and the shift in consumer goods and household goods buying from services that we experienced during the pandemic has gone away, but we have all sorts of new challenges and opportunities for ports, shipping, and supply chain.