Members of the House Subcommittee on Coast Guard and Maritime Transportation say the law, which provides ocean carriers with limited antitrust immunity, is not up to date with the operational realities of today’s liner industry.
Is it time, once again, to reform the Shipping Act?
The answer to that question is a resounding “yes,” according to Rep. John Garamendi, D-Calif., ranking member of the House Transportation and Infrastructure Committee’s Coast Guard and Maritime Transportation Subcommittee, who drew that conclusion at the close of a hearing Wednesday on U.S. maritime transportation regulatory programs.
“The law is not up to date with the realities of the industry that exists today…And that has to be changed,” Garamendi said at the close of a hearing Wednesday on U.S. maritime transportation regulatory programs.
The last time Congress implemented significant amendments to the 1984 Shipping Act was in 1998, when lawmakers added confidential service contract regulations for container carriers and shippers.
The Federal Maritime Commission is charged with implementing and enforcing the Shipping Act’s regulations to ensure fair competition in the ocean shipping industry.
During the past two years, however, the liner carrier industry has shrunk to 13 major foreign-flag shipping lines from about 20 and reduced its major vessel sharing alliances from four to three. Despite this rapid consolidation, the FMC has insisted that with its oversight, the industry remains highly competitive and collusion-free.
Several members of the House subcommittee disagreed with the FMC’s assessment, to say the least.
“The FMC’s responsibility no longer fits the reality of the industry,” Garamendi said.
Both the Subcommittee Chairman Duncan Hunter, R-Calif., and Peter DeFazio, D-Ore., ranking member of the House Committee on Transportation and Infrastructure, previously expressed their dissatisfaction with the FMC’s handling of the container carrier alliances during an April 4 hearing, suggesting that Congress should revisit, or even abolish, the limited antitrust immunity afforded to liner carriers under the Shipping Act.
In particular, Acting FMC Chairman Michael Khouri was questioned by the House subcommittee about the agency’s handling of a recent decision granting permission to a group of roll-on/roll-off carriers – WWL, Eukor, ARC, and GLOVIS – to jointly negotiate port vessel-handling services with tugboat operators. Khouri said the agreement was not a done deal, and the carriers needed to come back to the agency with their proposal for further analysis.
Thomas A. Allegretti, president and CEO of the American Waterways Operators, said he found the FMC’s apparent green light to allow the ro/ro carriers to negotiate collectively with the tugboat operators “deeply troubling.”
He noted that the carriers are becoming ever-larger market forces in terms of their size and scope, and the FMC is “either unwilling or unable to take action to halt and reverse this fundamentally unfair and anticompetitive situation. The FMC intends to extend its regulatory review over the tugboat industry, over which it has no statutory authority, and in the process, eviscerate the confidentiality of our contractual arrangements with ocean carriers.”
“In order to simplify operations and improve efficiencies, carrier agreements have, in some cases, included authority for joint procurement of some services that vessels require from vendors in the ports where the vessels call,” John Butler, president and CEO of the World Shipping Council, which represents global container carriers, told the subcommittee. “That is not the case with the three major alliance agreements, however,” referring to the THE, OCEAN and 2M alliances.
Butler emphasized that suitable regulatory mechanisms in the Shipping Act are already in place to manage alliance agreements and prevent any commercial abuses.
“The regulatory regime that the United States has in place is both flexible and powerful, and the Federal Maritime Commission has the tools to maintain fair and competitive liner shipping markets in support of America’s international commerce,” he said in his written testimony.
Lawmakers call for Shipping Act reform
