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September 3 2018

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30 The Journal of Commerce | September 3 2018 European Shipping: Midyear Review and Outlook Special Report said Olaf Merk, who leads the work on ports and shipping at the OECD's International Transport Forum. "Like mega-ships, alliances and consolidation have considerable impact on whole maritime logistics chains and a range of stakeholders including shippers, freight for- warders, ports, terminal operators, and port service providers such as towage companies. Maybe some of the current issues with reliability and service quality could be related to alliances," he said. In a joint submission by the World Shipping Council, the Eu- ropean Community Shipowners' Associations, and the International Chamber of Shipping, the shipping groups launched a robust defense of the consortia block exemption reg- ulation, which they said had made it easier for liner shipping companies to cooperate in an economically efficient manner for more than two decades. "The modest consolidation over the past five years has not under- mined the block exemption regula- tion's viability. There is neither an alternative method for companies to self-assess with the same degree of legal certainty nor an alternative form of cooperation that could achieve the same efficiencies. There- fore, the Consortia Block Exemption Regulation should be extended for a five-year period beyond its currently scheduled 2020 expiration date," the liner shipping submission stated. Despite the "modest consolida- tion" in the industry brought about by consolidation and new alliances, the submission said the exemption provided the legal underpinning for vessel sharing agreements (VSAs) that promoted competition by lowering barriers to entry in a given trade. "This, in turn, ensures that customers have a wider range of carriers to choose from, increasing competition. They also enable small- er parcels of capacity to be added to a trade than would be required by a single carrier to operate a scheduled service and thereby enable capacity to be adjusted more accurately to demand," the submission said. After the abolition of the liner conference block exemption in 2009, the EC reduced the market share threshold for the consortia block exemption from 35 percent to 30 percent, noting at the time that, "since the new legal framework has been in place and applied for only a short period of time, further changes should be avoided at this stage. This will avoid increasing the compliance costs of the operators in the industry." In capacity terms, on the two biggest east-west trade lanes touch- ing Europe, four of the six alliance pairs were under the 30 percent threshold in May 2018, according to Alphaliner. The largest alliances had market shares of 38 percent (2M), 34 percent (Ocean), and 24 percent (THE) in the Asia-Europe trade, and 23 percent (2M), 16 percent (Ocean), and 19 percent (THE) in the Europe-North America trade. The shipping group submission told the EC the industry has under- gone enormous changes in the past few years and without the block exemption in place, entering into the new alliances and many single-trade agreements would have been far more difficult with increased cost of compli- ance and less legal certainty. JOC email: twitter: @greg_knowler The OECD is studying liner performance and reliability.

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