Shipper group says change would reduce costs, promote competition with NVOCCs.
The National Industrial Transportation League, one of the nation’s largest and oldest associations representing shippers, has sent a letter in support of a petition by the World Shipping Council (WSC) that seeks an exemption from the ocean carrier service contract filing and essential terms publication requirements set forth in the Shipping Act.
“Granting the requested exemption would benefit the ocean transportation industry by eliminating unnecessary and costly regulatory burdens on ocean carriers,” said the NIT League.
The WSC — which counts most of the major container shipping companies as members — petitioned the FMC in September for exempting service contracts from the filing requirements of the Shipping Act.
It said such a change will not “result in a substantial reduction in competition. Service contracts filed with the commission reflect commercial terms agreed upon by the parties to such contracts. The fact of whether or not those contracts are then filed with the commission has no bearing whatsoever on the functioning of the competitive commercial marketplace.”
The NIT League agreed granting the WSC request “would promote competition between ocean carriers and non-vessel operating common carriers.” NVOCCs were granted a similar exemption earlier this year.
The shipper’s group added it was “unaware of shippers who need or routinely rely upon contract-essential terms that are published in ocean carrier tariffs” and claims that the FMC “does not have the resources to regularly audit the filed contracts,” noting that according to the FMC’s annual report for 2017, there were more than 800,000 filings of service contracts and amendments.
The NIT League says the exemption would “increase flexibility and responsiveness to the market by allowing shippers to begin shipping under service contracts immediately upon execution without having to wait for them to be filed” and promote competition by putting NVOCCs and vessel-owning common carriers like those that belong to the World Shipping Council on the “same footing.”
But two smaller shippers argued against the proposed change in comments they filed with the FMC and expressed concerns about what will happen if they get into disputes with carriers.
Jon Miller, the director of the export division of Wheaton Grain, a Wisconsin-based company that describes itself as a small to medium shipper of containerized agricultural products, told the FMC, “One of our main business challenges is ‘disputing’ the carriers. They have already reduced their administrative services to the point where we have to hire extra employees to overcome the incompetence of some/a lot of their staff that do not understand the industry (e.g. railroad workings, urgency of matters, and their own systems).
“The contract is all we have to ensure that we can be treated fairly with the carriers. They have teams of lawyers and we don’t have the resources to fight things. They send invoices out like the wind and all we have is our contract and expertise on how to protect ourselves.”
For example, he said, “we commonly get invoices from carriers for free time where all we have is our service contract to stand up and dispute what the correct free time should be.
“Port cuts and vessel cuts are always changing. What do we do if we have containers pulled and this happens? Our only defense is the contract with free time and history of all history on the container so we can present a solid argument.
“Carriers are coming up with many different prices for the same service,” Miller said. Contracts “give us protection that if they change the services our rate is guaranteed.”
Philadelphia-based Frankford Candy also said it was “opposed to the changes as outlined in the petition” of the WSC.
“Since the introduction of confidential service contracts, we have appreciated and relied on the Federal Maritime Commission to provide our company with guidance, oversight and protection,” wrote Sandra Burr, Frankford’s purchasing manager.
“We need some level of ‘cost certainty.’ Without the role that the FMC plays today, we fear we could well be subject to the introduction of extra — perhaps arbitrary — charges which would result in additional costs and leave us with no viable way to dispute or negotiate alternatives. We have seen and been made aware of these kinds of action in the past,” said Burr.
The NIT League said the exemption would “increase flexibility and responsiveness to the market by allowing shippers to begin shipping under service contracts immediately upon execution without having to wait for them to be filed” and promote competition by putting NVOCCs and vessel-owning common carriers like those that belong to the World Shipping Council on the “same footing.”
The WSC filing drew scant feedback during a comment period that ended on Monday.
The Caribbean Shipowners Association, which represents the carriers Crowley, Hybur, King Ocean, Seaboard Marine and Tropical Shipping, also supported the petition, as did Atlantic Container Line (ACL), a transatlantic carrier that is a subsidiary of Grimaldi and not a WSC member.
Atlantic Container Line said, “The elimination of contract filing would eliminate a significant cost to EVERY stakeholder in ocean transportation: the carriers, shippers, forwarders, NVOCC’s and the FMC. There is the pure administrative cost of preparing and filing huge amounts of data that nobody uses.”
Andrew Abbott, the president and chief executive officer of Atlantic Container Line (ACL), said in a letter to the FMC, “There is also the cost to the shipper and carrier associated with the restrictions in flexibility caused by the current requirements. The data compilation costs for the commission and all stakeholders are enormous. Its elimination would allow the FMC to focus more attention on proactively regulating ocean commerce. The commission could cut costs while becoming more effective and visible at the same time. The change would help everyone and hurt nobody.”
NIT League backs World Shipping Council petition
