Federal Maritime Commission widens liner probe, alliances scrutinised

Date: Friday, November 27, 2020
Source: Splash 247

The Federal Maritime Commission in Washington DC is widening its liner probe, determined to get a greater grasp on how the three main global alliances work. The future framework of liner alliances is now being brought into question given the stranglehold the three main alliances have on the main east-west trades.

Last week the commission started an investigation into liner activity in the ports of New York, Los Angeles and Long Beach as shippers voiced ever louder concern about the lack of available containers to shift their exports.

That investigation is looking at the policies and practices of global liners relating to detention and demurrage, container return, and container availability for US export cargoes amid a near historical high tightness of available container equipment this autumn.

Yesterday the commission stepped up its scrutiny of liner activity. The commission issued letters to the three global carrier alliances – 2M, THE Alliance, and the Ocean Alliance – requiring that certain carrier-specific trade data currently filed with the commission quarterly, must now be submitted on a monthly basis.

The commission’s Bureau of Trade Analysis (BTA) has traditionally relied on a combination of individual vessel operator confidentially provided data and information from commercially available industry data to monitor and analyse container carrier freight rates and service market trends. The commission’s BTA has determined that given recent fluctuations in the markets, with rates on the transpacific soaring to around the $4,000 mark, they need to receive key trade data directly from alliance carriers on a more frequent basis in order to better position staff economists to timely evaluate changes in the transpacific and transatlantic trades and report findings to the commission.

A core function of the FMC is the monitoring of ocean carrier alliance agreements filed with the agency. The three major global carrier alliances are the top priority and receive the highest scrutiny.

“These three agreements have the greatest potential to cause or facilitate adverse market effects based on the agreement’s authority and geographic scope in combination with underlying market conditions,” the FMC stated in a release yesterday.

FMC chairman Michael Khouri stated, “If we detect any indication of carrier behaviour that may violate the Shipping Act’s section 6(g) competition standard, we will immediately seek to address these concerns with direct carrier discussions. If necessary, the FMC will go to federal court to seek an injunction to enjoin further operation of the alliance agreement.”

Fellow commissioner Dan Maffei said the creation of the three main shipping alliances three years ago had created “more efficiency on the ocean side of the supply chain, but that in turn has caused much more inefficiency and congestion on the land side and that is something that we might need to tackle directly”.

Amid a record rates environment on the transpacific, liner executives have also been summoned to see government officials in South Korea and China in recent weeks.

South Korea’s Ministry of Oceans and Fisheries met with nine lines on November 12 to warn that shippers were airing grievances that they were unable to export their goods.

“Any reported unjust contract violation or unilateral change in contract terms will be scrutinised and punished if necessary so that the market order can be maintained,” the ministry explained.

Splash reported earlier this month on comments made by Rodolphe Saadé, chairman of CMA CGM, the world’s fourth largest containerline, discussing the pressure liners are coming under from Beijing.

“The market is so strong that they feel, the Chinese authorities, that at one point in time there needs to be a ceiling,” Saadé told the Financial Times.


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