Wednesday, May 3, 2017

New Freight Alliance Stymied as Container Shipping Lines Cooperation Blocked by US Authorities

Japanese Box Carriers May Well See Themselves Victims of 'America First'
Shipping News Feature
US – JAPAN – The latest attempt to form an alliance between freight carriers has fallen at one of the first hurdles as the US Federal Maritime Commission (FMC) has rejected the 'Tripartite Agreement' between Japan's big three container shipping lines Kawasaki Kisen Kaisha (K Line), Mitsui O.S.K. Lines (MOL) and Nippon Yusen Kabushiki Kaisha (NYK) first mooted in October last year, on jurisdictional grounds. The agreement would have seen the three carrier’s form a joint container shipping service in an attempt to address the industry wide problem of overcapacity.

The response will come as a blow to the three as they received clearance for the deal from the Singaporean authorities in March. The United States Shipping Act however does not provide the Commission with authority to review and approve mergers. After careful consideration, the FMC determined that the three shippers were ultimately establishing a merged, new business entity and that action is among the type of agreements excluded from FMC review. This is presumably deemed a different type of arrangement to the vessel sharing agreements and ‘alliances’ formed by so many carriers of late.

The decision also follows the FBI raid on premises of members of the ‘Box Club’ with the three Japanese lines all associated with that organisation, more properly named the International Council of Containership Operators. This grouping only contains a couple of shipping lines truly considered as American and, with President Trump’s avowed ‘America First’ policy, many in Japan will doubtless view this as having a xenophobic tinge, effectively stymying an intention to commence services in 2018.

All three partners in the rejected proposal already have arrangements with other box lines (all are in THE Alliance for example) but perhaps the fact they are all Japanese caused the Commission food for thought. The FMC has previously requested extra information for proposed cooperation’s and is obviously taking a careful look at such arrangements. The Tripartite Agreement was filed at the Commission on March 24, 2017 by K Line, MOL, and NYK, with the parties seeking authority to share information with each other in advance of a new business entity to be formed under the agreement next year which would have gone into effect on May 8.