Market Overview

FMC Splits World Shipping Council Exemption Petition

FMC Splits World Shipping Council Exemption Petition

The U.S. Federal Maritime Commission in response to a petition filed by the World Shipping Council in September 2018 approved a recommendation to exempt ocean container carriers from essential terms publication requirements in the Shipping Act. 

Essential terms are prepared by the ocean container carriers in tariff format when they file service contracts with the commission. These essential terms include the origin and destination port ranges, commodities involved, minimum volumes and the service contract duration. 

The commission agreed with the World Shipping Council that continued publication of essential terms no longer serves a purpose in the competitiveness of the ocean container shipping. 

However, the commission, based on the recommendation of the FMC's staff, rejected the petition's call to eliminate the ocean carrier confidential service contract filing requirement of the Shipping Act. 

"I would point out that we have three very large alliances that carry something north of 80% of the cargo in the U.S. east-west trades," FMC Chairman Michael Khouri told the commission. "One thing we're making sure is that there is competitive pricing among the members in each alliance."

He added that eliminating the service contract filing requirement at this time would impact the FMC's "effectiveness and necessity for tools to look into areas of anti-competitive behaviors." 

Commissioners Daniel Maffei and Louis Sola also approved the FMC staff recommendation to retain service contract filing but proceed with eliminating the publication of essential terms. However, Maffei said, "I think we'll be revisiting this in the future."

Commissioner Rebecca Dye opposed the FMC staff recommendation to retain the service contract filing requirement for ocean container carriers. 

"It comes as no surprise to anybody here that I would grant the World Shipping [Council] petition," she said, citing that she favors minimum regulatory requirements for the container shipping industry in general. 

The Washington, D.C.-based World Shipping Council — which counts most of the major container shipping companies as members — petitioned the FMC in September 2018 to exempt the vessel-operating common carriers from service contract filing requirements of the Shipping Act. 

The World Shipping Council stated in its petition that the change would not "result in a substantial reduction in competition. Service contracts filed with the commission reflect commercial terms agreed upon by the parties to such contracts. The fact of whether or not those contracts are then filed with the commission has no bearing whatsoever on the functioning of the competitive commercial marketplace."

Dye praised the World Shipping Council's petition for "offering workable accommodations to address FMC internal concerns just like the ones we accepted from our NVOCC partners." 

"We know we do a good job enforcing competition among ocean carriers — they really know it — and that we don't rely on filed contracts in our competition enforcement program," she said.

"The most important reason that this order should be defeated is in its finding regarding shipper harm," Dye added. "It's actually based on information that's unrelated to service contract filing and it ignores the comments and strong support of the petition by the nation's oldest and most reliable transportation shippers' association, the National Industrial Transportation League." 

In addition to the NIT League, the World Shipping Council petition received letters of support from the National Industrial Transportation League, Caribbean Shipowners Association and Atlantic Container Line. Letters opposing the petition were sent to the commission by Wisconsin-based Wheaton Grain and Frankford Candy of Philadelphia.

Dye said she would submit a more extensive decision of dissent to her fellow commissioners for their consideration. 

The FMC also voted to approve a notice of proposed rulemaking that would institute the elimination of essential terms publication for service contracts by the ocean container carriers.

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Posted-In: FMC Freight Freightwaves LogisticsNews Global Markets General


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