FEDERAL MARITIME COMMISSION, CONTAINER ALLIANCES, FMC

FMC's Lidinsky worries about shipping alliances becoming supra national forces

Regulators need to tell alliance cross traders "enough is enough," says Lidinsky.

By Chris Dupin |Tuesday, April 07, 2015

   With the Federal Maritime Commission slated to discuss congestion at U.S. ports and major ocean carrier alliances next week, one of its members is telling shipping lines not to use “larger vessels, self-imposed terminal chaos, equipment shortages, 'blame the trucker' games, etc. to justify unwarranted charges to anyone in the American supply chain.”
   Speaking at FMC's annual Northeast Trade And Transportation Conference in Newport, R.I., Commissioner Richard A. Lidinsky, Jr. told members of the Coalition of New England Companies for Trade that the FMC is preparing for a second second summit meeting with regulators from the European Union and People's Republic of China “to ensure that alliances do not become supra national forces."
   "Surprisingly, the challenges that face us are not new," said Lidinsky. "Today, they are a legacy through the years of conferences, super conferences, mega ports, load centers, talking agreements, stabilization agreements and now new alliances."
   Four major alliance of container carriers - the 2M of Maersk and MSC; the Ocean3 of CMA CGM, UASC and China Shipping; the CKYHE Alliance of Cosco, "K" Line, Yang Ming, Hanjin and Evergreen; and the G6 Alliance of APL, Hapag Lloyd, Hyundai, MOL, NYK and OOCL - carry the majority of East-West containerized cargo between Asia, Europe, the Mediterranean, and the United States.

Lidinsky

   Lidinsky noted there are "virtually no U.S. flagged vessels to serve our international waterborne trade. And almost 100 years ago, Congress recognized this situation that is still with us today. 94 percent of our containerized cargo moves in foreign vessels, creating a situation where very often foreign flagged carriers from alliances, who establish rates, congest and dominate U.S. port terminals.
   “Two years ago, as the new alliances were being formed, there were some concerns expressed. I warned that alliances were positioning themselves to exercise authorities beyond the reach of governments. Other commentators expressed concern from a shipper’s point of view. I also cited as one of the reasons for voting against that such arrangements will negatively congest terminals and landside infrastructure.”
   “In the process leading up to our alliance votes last year, certain carriers displayed disrespect with regulators, talked of creating a several hundred staff office to handle simple slot charters, and put undue pressure on our ports and services to meet their unreasonable demands,” said Lidinsky.
   “While we've yet to feel their full impact here on the Atlantic, much of the port congestion troubles that just took place on the West Coast, reportedly resulted from alliance cargo, stowed to reflect new alliance ties, rather than previous stowage practices, so it had to be directed to a specific terminal or trucker, thus exacerbating the overall problems,” Lidinsky added.
   Lidinsky said the primary driver for the creation of these major shipping alliances is the increasing use of ultra-large containerships that are "of such size that they cannot today, and very likely not tomorrow, call U.S. ports."
   "The larger ships that can call at U.S. ports have also contributed to the congestion," he said. "Currently under construction, there are 66 vessels in the 15,000-19,000 TEU range, and four ships over 20,000 TEUs. Large vessels, besides creating imbalance in certain trades, presuppose huge investments by local, state, and national governments of countries being served.”
   Last year, the FMC held four port congestion forums in Baltimore, Charleston, New Orleans and Los Angeles to identify the causes of and possible solutions to U.S. port congestion problems.
   Next Monday, in a closed session at its headquarters in Washington, the FMC is slated to discuss congestion and major carrier alliances as well as receive a staff report on rules, rates, and practices relating to detention, demurrage, and free time for containerized imports and exports moving through selected U.S. ports.
   Lidinsky said in the “U.S. supply chain, in the movement of a container from China to Boston via the Suez Canal, the regulatory reach of our government covers every party except one...the owner or lessor of marine chassis equipment. And all the analyses of what just took place on the West Coast point to this simple piece of equipment causing severe problems for recipient of the cargo.
   “If we are to come to grips with alliances impacting our country’s waterborne commerce we must have the regulatory conviction to say to alliance cross traders, ‘enough is enough, and you will serve our importers, exporters, ports, inland transport network, and above all, our consumers with fair rates and efficient vessel practices,’” Lidinsky added. “As ships begin to gather at anchor off San Pedro Bay, a group of carriers came to us seeking a green light to impose congestion surcharges they had just published in their tariffs. We said to them, 'What? You are trying to collect on a condition you caused?' No was our answer.”
   He urged members of CONECT “to work together with the Commission to solve these problems for the sake of our foreign waterborne commerce as any solution we fashion will have an impact on all involved.”
   He said the FMC is preparing for a second second summit meeting with regulators from the European Union and PRC “to ensure that alliances do not become supra national forces.”