Under a proposed reauthorization bill for the Federal Maritime Commission, container carriers would have to chose between belonging to shipping alliances or rate discussion agreements.
Members of the Transportation and Infrastructure Committee of the U.S. House of Representatives are proposing major changes to current liner shipping regulation.
During the mark-up of the Federal Maritime Commission (FMC) Authorization Act of 2017 (HR 2593), Rep. Duncan Hunter, R-Calif., said the bill will “require carriers to be in a rate discussion agreement or a vessel sharing agreement, but not both.”
That would be a significant shift in policy, as most members of the 2M, Ocean and THE ocean carrier alliances belong to the Transpacific Stabilization Agreement (TSA), the rate discussion agreement for carriers in the transpacific trade.
Rep. Peter DeFazio, D-Ore., however, cautioned the legislation may yet be revised.
“I’m not sure we have got this exactly right,” said DeFazio. “I’m not certain we have gotten to the fundamental problem of essentially default approval of any sort of anticompetitive or potentially anticompetitive practice with these huge conglomerates and their further consolidation.
“We will be looking at this before we go to floor, and we may want some additional changes to be sure we have addressed the problem,” he said.
The “default approval” mentioned by DeFazio is specified in the Shipping Act of 1984, which says when carriers file agreements at the FMC, they go into effect 45 days after filing unless the FMC goes to court and obtains an injunction against an agreement on the grounds that it is likely to result in an unreasonable reduction in transportation service or an unreasonable increase in transportation cost by reducing competition.
DeFazio pointed to the decision by the U.S. Department of Justice to serve senior liner executives who were members of the Box Club, with subpoenas in March.
“One would suspect, we don’t know yet, but there is a suspicion that there were anticompetitive discussions going on at this private meeting,” he said. “We have to get to the bottom of this. We are going to make it a competitive industry, but also one that does not degrade our domestic industry.”
John Butler, president and chief executive officer of the World Shipping Council, the major trade association for the liner shipping industry, said in a statement, “The legislative process is just that, a process, and the beginning and the end often look a bit different. Congress decides what the laws are, and we will continue to work with policymakers toward the common goal of a predictable and transparent regulatory regime that supports an efficient international ocean transportation system that works for all supply chain participants.”
The TSA also referred queries about the provision to Butler.
Hunter, who also heads the House Subcommittee on Coast Guard and Maritime Transportation, said the bill would also “address industry concerns and eliminate any opportunities for port service providers to be disadvantaged in any negotiations with ocean carriers.”
Thomas Allegretti, president and chief executive officer of American Waterways Operators (AWO), which represents domestic tugboat and barge companies, said in a March letter to FMC Comissioner Michael Kouhri AWO was “deeply concerned about provisions in agreements filed with the FMC that permit foreign ocean carrier alliances to jointly negotiate with domestic harbor service providers that have no counterbalancing ability to take collective action.”
According to Hunter, the House FMC reauthorization bill “flat out prohibits carrier alliances from negotiation as an alliance with the tug providers at the port. We’re going to make sure these carriers come in one at a time to negotiate with the tugs.”
Rep. John Garamendi, D-Calif., said the authorization “contains badly needed provisions to help support marine service providers and our domestic shipping industry. Consolidation in the global shipping industry has put terminal, tug and bunkering operators at a disadvantage, and this legislation will help ensure fair competition between global shipping alliances and our domestic port services.”
The language in the House bill is different from that in the Senate version of the FMC reauthorization, which would essentially put tugs operators on the same footing – as is currently the case today with truck and rail and other inland service providers – allowing carriers to jointly negotiate with tug providers but not giving them antitrust immunity for that activity.
Caitlyn Stewart, director of regulatory affairs at AWO, told American Shipper today “AWO strongly supports the amendment offered by Rep. Hunter to H.R. 2593, the House version of the Federal Maritime Commission Authorization Act of 2017, at yesterday’s House Transportation and Infrastructure Committee markup. This amendment, which was approved, prohibits a group of one or more ocean carriers from negotiating with a provider of towing vessel services.”
She added that AWO does not believe the language in the Senate bill “goes far enough to protect tugboat operators from anti-competitive behavior on the part of ocean carrier groups and alliances.”
Garamendi also said the legislation “reauthorizes the Small Shipyard Grant Program, which supports our shipbuilding industry and works to promote American technical expertise through shipyard modernization and worker training.”
House T&I Committee proposes new restriction on liner carriers
