Tuesday, August 30, 2016

Container Shipping Companies Must Adhere to US Instructions When Forming Freight Alliances

International Consortium of Lines Agreement Halted by Regulators Questions
Shipping News Feature
US – WORLDWIDE – After a year in which container shipping alliances between the major freight carrying lines have held the headlines, and with global regulators mostly allowing shipping companies to enter such partnerships unopposed, comes the news that the US Federal Maritime Commission (FMC) has ‘stopped the clock’ on the formation of the Ocean Alliance between CMA CGM, COSCO Container Lines, Evergreen, and OOCL, asking for more information on the proposed vessel sharing agreement before the discussion on the finer details of the collaboration can go further ahead.

The FMC has filed a Request for Additional Information (RFAI) which temporarily halts the Ocean Alliance agreement until such time as the filing parties answer the questions posed in the RFAI. Once those questions are answered and filed with the Commission, a new 45-day clock commences. This Ocean Alliance agreement was filed with the Commission earlier this year on July 15, and would have become effective on August 29, 2016 without this Commission action. Now the Ocean Alliance parties say they are looking to go live with their agreement around April 2017. Speaking on the decision to pause further action, FMC Commissioner William Doyle said:

"I pay special attention to competition matters especially to small businesses, downstream participants and the upstream, supplier and vendor markets. We’ve been down this road before with language proposed but not implemented by the P3 Alliance and the language in the existing 2M Alliance (Maersk and MSC). I’d like to see fair dealing and transparency in how the parties handle negotiations with third parties, suppliers, small businesses, and other service providers. Using their proposed buying power through proposed joint purchasing agreements could harm both downstream and upstream participants.

"There is plenty of time for the Ocean Alliance parties to review and digest the questions posed by the Commission. I encourage Ocean Alliance representatives to work with FMC staff in answering the RFAI."

The existing 2M Alliance Agreement, which would be a direct competitor to the Ocean Alliance, provides safeguards for US third-parties (including small businesses), such as marine terminal operators, stevedores, tug operators and other providers or suppliers. The 2M Parties must negotiate independently and enter into separate contracts with the third parties. This is the stance which presumably the US regulators wish for all future container alliances to adhere to in order to protect American interests.