Acting Federal Maritime Commission Chairman Michael Khouri met with overseas counterparts in London this week to discuss recent changes within the ocean shipping industry and potential impacts they may have on shippers and other service providers.
Acting Federal Maritime Commission Chairman Michael Khouri, who traveled to London this week to hold bilateral maritime consultations on behalf of the United States with the United Kingdom, told attendees at the London International Shipping Week event on Wednesday that his agency is closely monitoring changes within the container carrier industry for potential negative impacts on shippers and other service providers.
“Given the significant amount of change that has taken place over the past few years, shippers are viewing the new commercial environment with many questions, and perhaps, some trepidation,” Khouri said. “Put succinctly, shippers are concerned that fewer carriers, operating in fewer, yet larger alliances, will not only equate to less service choices, but to a commercial environment where shipping lines enjoy an advantage of leverage in contract negotiations.
“These apprehensions are not limited exclusively to cargo owners. We have heard similar sentiments voiced by terminal operators, equipment lessors, and various service providers,” he added.
During the past two years, the container carriers have reduced the number of alliances from four to three. Consolidation will similarly reduce the number of large container carriers from 20 to 12 by early 2018. On top of this, the bankruptcy of Hanjin early last year caused chaos among international shippers and ports lasting for months.
“The industry is entering a new era and it is not surprising that there may be questions about whether carriers will be in a position to dictate rates,” Khouri said.
He noted that in response to these changes in the container carrier industry the FMC has strengthened its economic review process of new alliance agreements filed with the commission.
“We have required tighter limits on the scope of each agreement’s authority, as well as expanded quarterly reporting requirements to be filed with the commission,” he said. “All of this is done to ensure the commission’s ability to detect and respond to any signs of anticompetitive rate or service behavior or abusive business practices.”
Khouri also said the FMC is regularly communicating with competition counterparts overseas to discuss recent container shipping trends and developments, such as the consolidation, alliances and how to address future carrier insolvencies, if they should occur.
“These meetings provide a forum to discuss our respective approaches to the common goal of ensuring continued free and fair market competition in ocean shipping,” he said.
Khouri said he looks forward to future consultations and discussions with U.K. competition officials as they develop a competition policy for the international liner industry post-Brexit.
While in London this week, Khouri also met with Magda Kopczynska, the European Commission’s director for general mobility and transport, to exchange views and information on a variety of industry and policy matters, and International Maritime Organization Secretary General Lim Ki-Tack for a session addressing legal, safety, and environmental issues.
Khouri: FMC closely monitoring container carriers, alliances
