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Tuesday, June 2, 2020

Maritime Logistics Professional

FMC Tightens the Net in the Trade Lanes...

Posted to Martin Rushmere (by on January 14, 2011

...but Holes Let Out the Big Fish

Antitrust scrutiny of trans-Pacific carriers has just got a little sharper, or so it would seem. Grand Alliance, the New World Alliance, and CKYH now have to report on route schedules, TEU numbers and deadweight capacity each month instead of quarterly. (Of course, they are in more than just the Pacific lane, but that’s what the FMC is after.)  Alliances also will be required to provide advance notice of planned increase or decrease in capacity. Carriers also will file notice of vessel substitutions or changes in sailing schedules that leads to at least a 5 percent change in capacity in any trade lane.

FMC boss Richard Lidinsky calls it “the closest scrutiny” of what the lines are doing in the 26 years of the Shipping Act and says the agency will be “watching like a hawk.”

“Global alliances, while potentially efficiency enhancing, also have the potential to be complex and anticompetitive operational agreements,” the FMC said. One justification is that under the existing rules, the information the agency gets can be five months out of date. One can’t help but get the feeling that it amounts to little more than bureaucrats playing with paperwork. The inference to be drawn is that until now, all that information has been useless, even though no one has said anything and there have been no complaints from customers or traders.

For 26 years in fact, the rule has been pointless.

And the new rule ignores the reality that at least 75 percent of the Pacific trade (and presumably the other routes) is ruled by year-long contracts. It makes no difference if rates and capacities are changed by 5 percent or more --- the contracts set the rates (which usually vary only because of the Bunker Adjustment Factor) and the number of shipments, which binds the carriers to accepting a certain number of TEUs and the shipper to loading them onto the vessel.

What does worry shippers is the protracted and expensive arbitration process if they sue a carrier for breaking the contract. They would like a more efficient mechanism. Carriers in the main are not too bothered – they just refuse to accept any more cargo if a customer fails to live up to the contract, knowing that someone else is available to step into the breach.