Friday, September 24, 2010

US Bill Could Remove Anti Trust Immunity And Damage Container Shipping Industry

Proposed Regulation Change Concerns World Shipping Council
Shipping News Feature

US – The World Shipping Council (WSC) have expressed their concerns that the proposals to amend the Shipping Act, H.R. 6167, could seriously set back the recovery of the major container carriers. The current Shipping Act allows carrier agreements filed with the Federal Maritime Commission to have limited antitrust immunity to discuss rate guidelines and trade forecasts.

Congressmen Oberstar and Cummings introduced their proposals for amending the Shipping Act a week before Congress recesses for the November elections and the WSC are asking for a full and frank discussion of the issues prior to any amendment going through. We have often pointed out what other sectors of the freight carriage industry view as an anomaly as they themselves feel the pain of anti trust regulation in action. Already the Staggers Act is up for review to the chagrin of rail hauliers whilst the woes of air cargo carriers and forwarding agents and truck manufacturers have also been spotlighted.

Ocean carriers of course are already under threat from customers irate at unprecedented tariff increases which some contend are in breach of contract as the pending action by UK retailers Argos against Danish giant Maersk illustrates.

Whilst acknowledging the right of Congress to revise the Act the WSC believe that removing the ability to set realistic rates would lead to a return to the market chaos which we saw previously as cargo volumes slumped. The policy of maintaining rates is a mutually agreed one with no binding agreements but trade cooperative agencies such as the Trans Pacific Stabilization Alliance have urged associates to maintain higher rates to ensure their members survival in the face of a rate war.

The WSC say that shipping companies have invested many billions of dollars years in advance to meet container trade growth that was three to four times GDP growth over the past 20 years. Investments of this scale and duration need some measure of assurance and predictability. If the investments are not made in advance of when the capacity is actually needed, cargo transportation will suffer.

Seemingly amendments would also affect the cooperative agreements between carriers and the WSC are uncharacteristically scathing about the effects of these. They say:

“……the industry’s operating agreements improve service and increase the number of competitive options on any given trade lane. The bill would disrupt current services and operations, and it would make cooperative arrangements impractical in the future. We can identify no benefit and many disadvantages for American commerce arising from such a proposal. If enacted, the bill would create an ocean transportation system that would make U.S. trades less efficient and more costly for carriers, resulting in less choice, less capacity, lower service quality, and higher costs for U.S. exporters and importers.”

The WSC also believe that, if adopted, the new rules would vastly increase government intrusion into the details of business-to-business commercial conduct saying that the draft legislation proposes various forms of rate regulation, mandatory revenue transfers, intrusion into how parties agree to structure their commercial offerings and agreements, and burdensome and ill-defined reporting requirements.

In short the WSC are calling for a fully detailed discussion with all stakeholders before Congress embarks on a process that they consider could potentially cause immense damage to an industry that has invested billions of dollars with no guarantees of future profits and is the vital artery for all trade.