Friday, October 15, 2010

World Body Reacts To Shipping Act Aimed At Regulating Freight Rates

WSC Say Bill Would 'Destabilize the Industry'
Shipping News Feature

US – Following their initial comments last month on the ‘Shipping Act 2010’ H.R.6167, the World Shipping Council (WSC), whose members operate around 90% of liner shipping capacity including all the major container and bulk freight and tanker carriers, has come out heavily against the proposed changes which the Bill, if passed, would make with regard to the way that the international liner shipping industry is regulated in U.S. foreign trades.

The WSC say that much attention has been paid to the fact that the bill proposes elimination of the limited antitrust immunity currently available for rate discussion agreements filed with the Federal Maritime Commission (FMC). It is the ocean carriers’ expectation that the repeal of rate discussion authority would lead to greater rate volatility and less predictable and less stable markets, which would not be beneficial to U.S. commerce.

In a somewhat ominous tone the WSC statement says: ‘If the U.S. Congress were to consider this change in the law, the group (WSC) states that the U.S. Congress should carefully consider and be comfortable with the market effects that would result.’ The statement continues to point out that H.R. 6167’s proposed changes are not limited to rate discussion agreements, however, it contains many other provisions that the WSC believe would be detrimental to trade.

The Council asserts that passing 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 whilst giving more regulatory powers to the Federal Maritime Commission (FMC). The FMC would effectively have direct control over cargo carriers in terms of their relationship with customers including commercial negotiations about space availability, new equipment regulations for ship owners with more burdensome and costly reporting requirements.

The WSC state that it does not expect this Congress to enact H.R. 6167 during its remaining days of session, but determined that the serious adverse consequences of the proposal warranted a statement and analysis given that proponents of the Bill were arguing that the proposed changes resemble the approach taken by the European Union towards such agreements and that it would not significantly affect carriers’ operating agreements and would allow those agreements to remain in place.