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Friday, May 29, 2020

Maritime Logistics Professional

Hainan Shipping Gets the Nod from the FMC

Posted to Martin Rushmere (by on December 15, 2010

NITleague helps to get exclusion from the 30-day rule

While all antitrust attention is on The Federal Maritime Commission's views on the carriers' behavior during the crisis two years ago, the commission has allowed a concession that in other times would have gained more notice.
Hainan Shipping, a China state-owned company, has been exempted from the 30-day rule that forbids government-owned corporation from changing rates within 30 days of notifying the FMC. The purpose of the rule is to prevent "predatory pricing" – setting rates below economically viable levels so as to crush competition from commercial rivals. (The principle is that government companies can soak up losses indefinitely.)
Support from the National Industrial Transportation League (NITL) was the final factor that led the commission to lift the rule.
"NITL supports granting the Petition on the grounds that it is pro-competitive and consistent with the Ocean Shipping Reform Act’s market-based focus," says the commission's ruling, "and will not affect the Commission’s substantive authority over Hainan’s tariff rates. NITL believes that granting the exemption will have a pro-competitive impact on the US ocean liner industry by providing Hainan with the same tariff reduction rights enjoyed by other liner carriers not subject to the Controlled Carrier Act. Moreover, NITL believes that Hainan should have the ability to reduce common carrier rates and tariff terms promptly to meet its customers’ pricing requirements and to respond to market forces. "
This is consistent with the league's hostility to the TransPacific Stabilization Agreement.
Other concessions have been granted in the past to China Shipping, Sinotrans and American President Lines in 1984 (when there was a federal shareholding)
"In each of the … previous controlled carrier requests for similar relief, the Commission has found that granting the exemption would increase rather than decrease competition," says the FMC.
Other factors in the decision were that Hainan has a small market share and is not a member of the TransPacific Stabilization Agreement. If it does join, you can be sure that the NITL will be breathing down the commission's neck and calling for the rate exemption to be removed.