Freight & Trade Alliance (FTA) and the Australian Peak Shippers Association (APSA) have prepared the following update in terms of advocacy activity relating to shipping competition and container detention.
US FEDERAL MARITIME COMMISSION
The United States Federal Maritime Commission (FMC) has released a 65 page report into the effects of COVID-19 on the Ocean Shipping Supply Chain – available HERE
Some observations are provided below.
Shipping Competition
Of significant note are the following references: - the current market for ocean liner services in the Trans-Pacific trade is not concentrated and the Trans-Atlantic trade is only minimally concentrated;
- competition among ocean common carriers, among the three major alliances and among the members in each of these alliances, is vigorous;
- the market for ocean services remains highly contestable, particularly in the Trans-Pacific trade;
- ocean transportation prices, especially spot prices, are disturbingly high by historical measures, those prices are exacerbated by the pandemic, an unexpected and an unprecedented surge in consumer spending, particularly in the United States, and supply chain congestion;
- 'blank sailing' were a particular concern because of their potential to be used for anti-competitor purposes, however the report suggests reduced service by ocean carriers was driven by port congestion rather than a desire to reduce capacity; and
- the historically high freight rates experienced recently by U.S. exporters and importers have been devastating to many, but the FMC claims it has done its job during the COVID-19 pandemic to enforce it competition authority.
In conclusion, Federal Maritime Commissioner Rebecca Dye expressed the opinion that US markets are competitive and the high ocean freight rates have been determined by market forces of supply and demand.
Commentary
Whilst Commissioner Dye's report came up with much valuable detail, FTA/APSA are left questioning her conclusion that vigorous competition exists.
To be clear, FTA/APSA are not saying that high freight rates are the result of anti-competitive practices. As per Commissioner Dye's conclusions, we can accept that high demand and limited supply is the cause. However, in an environment of "vigorous competition", we would see additional supply by competing entities introduced to meet demand and rapidly drive down prices. In the current environment, demand remains high and that additional supply does not exist.
First quarter results for 2022 are again staggering with all foreign owned shipping lines reporting multi-billion dollar profits. Good luck to them. Foreign owned shipping lines have invested heavily over a sustained period of time taking narrow margins over many years to be in a position that they are in now. Unlike so many other sectors of commerce, it is not easy for new parties to enter the market so they are likely to enjoy this position of strength for an indefinite period of time.
It will be interesting to see if the five eyes (competition regulators in Australia, UK, NZ, Canada and USA) come to the same conclusion that high freight rates have been achieved without any level of anti-competitive practices. We certainly hope so for the integrity of the entire international trade sector.
FTA/APSA is of the view that Part X of the Competition and Consumer Act should be repealed. If the new Federal Government sees a need for ongoing protections for foreign owned shipping lines, our alternate position is that this be administered with tight oversight by a Federal Regulator – we know from first-hand experience as the current designated peak industry body under Part X that it offers virtually no protections to Australian exporters and importers.
Container Detention
In terms of container detention, the report noted that some shipping lines are not in full compliance with the "Interpretive Rule on Demurrage and Detention" and that the FMC is ensuring compliance with the "incentive principle" embodied in the Rule.
GLOBAL COMPETITION REGULATORS
Last night (1 June 2022), FTA / APSA representatives joined colleagues as a part of a Global Shippers Forum (GSF) Policy Meeting.
A detail presentation was delivered by MDS Transmodal and GSF executives examining elements from the most recent Container Shipping Market Quarterly Review (2022: Quarter 1).
Summary below – the full report and a paper titled "Alternative approaches to measuring concentration in liner shipping" are available HERE (FTA / APSA MEMBER LOGIN REQUIRED) |
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GSF members also provided a brief of their advocacy activity in dealings with national competition regulators. The most advanced appears to be Freight Management Association of Canada through their dealings with the Canadian Competition Bureau and the US Department of Justice.
FTA / APSA provided an update on its most recent meeting (31 May 2022) with the Australian Competition and Consumer Commission (ACCC) that addressed a range of matters including exclusive dealings, logistics disruption (including rail to Port Botany / short receival windows), freight rates, surcharges and ongoing Terminal Access Charges.
AUSTRALIA
In an Australian context, the much anticipated release of the draft Productivity Commission report examining Australia's Maritime Logistics Systems will reveal the key recommendation to be considered by the new Federal Government. As previously reported to members, the draft report was due to be released in May but will be delayed by several weeks as a result of the timing of the recent election and caretaker period.
FTA/ APSA Advocacy
During this extended period until the draft is released, FTA / APSA will continue gathering evidence from members to support our eight (8) key recommendations as outlined our original submission: - shipping competition review
- minimum service levels and notification periods
- infrastructure investment
- regulation of Terminal Access Charges
- regulation of container detention practices
- waterfront industrial relations reform
- implementation of Biosecurity reform priorities
- extension of IFAM funding
Please forward evidence to Tony Vinson (Head of International Freight and Logistics - FTA / APSA) at avinson@FTAlliance.com.au
Please also refer to the following:Container Detention
While it is outside of the FTA / APSA operational remit to intervene on members' specific commercial dealings between shipping lines and / or transport operators, our focus remains on achieving sustainable, long term reform to address current 'unreasonable' container detention practices.
To support this process we request members complete the proforma spreadsheet along with relevant documentation – refer HERE (FTA / APSA MEMBER LOGIN REQUIRED)
Please note that all such evidence will be shared with and maintained by the Productivity Commission in strict confidence.
Please refer to the following:Hear Direct from the Productivity Commissioner
Please join us at the APSA Conference in Wagga Wagga, NSW (30 and 31 August 2022) to hear direct from Stephen King [Commissioner, Productivity Commission] who will address:- Australia's Maritime Logistics Systems – formal review, industry submissions and next steps
- Future international shipping trends – threats and opportunities
- Scope of potential government intervention
Draft program and registration details available HERE
Paul Zalai - Director FTA | Secretariat APSA | Director GSF
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