The LoadStar has produced a compelling article highlighting that the European Commission does not regard the huge container spot rate increases between Asia and Europe as sufficient justification to investigate shipping lines for an infringement of the Block Exemption Regulation (BER) for consortia.

Representing Freight & Trade Alliance (FTA) and the Australian Peak Shippers Association (APSA), I have engaged with the Global Shippers Forum (GSF) Secretariat and fellow board members in terms of this controversial outcome and have provided the below pertinent insights and next steps in an Australian context:

Sky-high ocean shipping rates and lack of competition? … it's all shippers' fault, apparently!

There were three significant policy developments on this issue over the past couple of weeks: a frustratingly fruitless meeting between European shippers and the European Commission; a hint that disciplinary action against carriers is imminent in the USA; and (perhaps in anticipation) a lengthy press release from the World Shipping Council (the global representative body for international shipping lines) saying it is nothing to do with them and that we should all work this out between us!

The European Commission declines to take the initiative …

The European Shippers Council and the European federation of freight forwarders (CLECAT) discussed the current ocean shipping market with the European Commission on Wednesday 13 January 2021. The GSF only became aware of the meeting when ESC issued a press statement summarising the outcomes on Saturday 16 January 2021. It seems the Commission told ESC what GSF already knew: that to initiate an investigation of the EU Consortia Block Exemption Regulation you need to either wait for the next formal review (due in 2023) or file a formal Complaint, which is a set legal procedure and needs to be supported by sound evidence and data. This seems a poor outcome from such an important opportunity.

NOTE: Knowing this reality was a prime reason for GSF working with MDS Transmodal to compile the Container Shipping Market Quarterly Reviews launched last month which will provide the data necessary to sustain any future action.

… unlike the Federal Maritime Commission ...

Meanwhile, in Washington, the Chairman of the US Federal Maritime Commission has hinted that the outcomes of the current investigation into the management of export containers in US ports could result in sanctions on shipping lines, although investigations remain on-going. FMC chairman Commissioner Carl Bentzel admitted in a media interview that the FMC may not have given sufficient consideration to the workings of the agreements filed with FMC that allowed the shipping Alliances to jointly manage capacity during 2020. See the full interview that Carl Bentzel gave to Container News available HERE (Registration may be required).

… although carriers insist it's nothing to do with them!

Possibly with the FMC investigation in mind, the World Shipping Council has issued a media statement that attempts to put the cause of the recent rate rises squarely at the door of shippers and other intermediaries. It also robustly defends the virtues and benefits of Vessel Sharing Agreements, which are the operational exchanges of commercially sensitive information that the CBER and other anti-trust immunity rulings permit. One section in WSC's statement in the final paragraph summarises the organisation's position: "To remove bottlenecks, container velocity must increase, forecasting must be more accurate, and transparency must increase across the supply chain. Ocean carriers are doing their utmost to manage the supply chain disruptions caused by COVID-19 and invite all parties to engage constructively to do the same".

This repeats what is becoming the standard carrier narrative in this debate, that the high freight rates have been caused by a shortage of suitable empty containers because shippers are failing to return them to the pool quickly enough, are reluctant to commit to forward volumes, and are refusing to share information with carriers to help them plan ahead. In short, WSC is saying it is shippers that are bidding up the prices – carriers are merely struggling to manage the crisis.

… Shipping Australia maintaining the theme

We endorse the commentary in The Daily Commercial News from Peter van Duyn (Maritime logistics expert, Centre for Supply Chain and Logistics, Deakin University) in response to the recent explainer article on the build-up of empty containers in Australia by Shipping Australia (the Australian representative body for international shipping lines). "Whilst I am in general agreement with the tenor of the article, Shipping Australia seems to blame everybody else in the container supply chain apart from its members, the shipping lines." Peter's response highlights related impacts on equipment availability, global shipping practices and a dramatic increase in freight rates.

… next steps in an Australian context

It is now more evident than ever that an effective oversight of shipping line commercial practices is necessary for Australia's economic prosperity.

APSA (and FTA as serving Secretariat) is the designated peak shipper body granted status by the Federal Minister for Infrastructure and Transport under Part X of the Consumer & Competition Act 2010 (Part X) to represent the interests of Australian shippers in relation to liner cargo shipping services.

Part X provides broad exemptions from competition law for registered shipping lines to coordinate with each other in transporting cargo to, or from, Australia. Part X has evolved over several decades having been first included in the Trade Practices Act 1974 to address a concern that Australia, being geographically remote, was not sufficiently attractive as a destination for international shipping lines.

However, the 2015 Australian Competition Policy Review (Harper Inquiry), found that Part X is outdated and unnecessary, and that it should be repealed, with the Australian Competition and Consumer Commission (ACCC) to introduce a narrower 'class exemption' as a first step to its repeal.

Over the last thirty years, APSA has advocated for the retention of Part X in responding to the Harper Inquiry and the many formal reviews before it. However, further shipping line market consolidation over the last five years has coincided and the emergence of a spate of new surcharges and increased freight rate resulting in significantly higher supply chain costs. This outcome clearly exposes significant contemporary deficiencies in the effectiveness of Part X in being able to achieve basic shipper protections and the need for modernisation of legislation.

In response to the Proposed Class Exemption for Ocean Liner Shipping (discussion paper) published on 3 December 2019, FTA / APSA examined international experiences and have provided a detailed submission including nine (9) recommendations for consideration by the ACCC – submission available HERE.

APSA and FTA have followed up with the ACCC and understand that the review will soon commence following disruption to trade during 2020 caused by COVID-19. We commend the ACCC for driving this reform and look forward to ongoing engagement to support our shippers compete in international markets with considered and appropriate regulation.

Paul Zalai
Director and Co-Founder | Freight & Trade Alliance (FTA)
Secretariat | Australian Peak Shippers Association (APSA)
Director | Global Shipper Forum (GSF)

Cargo owners and forwarders - next steps against alliances to cap soaring freight rates