Issue link: https://jocdigital.uberflip.com/i/1488405
Januar y 2, 2023 | Journal of Commerce 71 www.joc.com EXECUTIVE COMMENTARY 2023 ANNUAL REVIEW & OUTLOOK Government ▶ "With only nine large carriers dominating the oceans, the FMC must remain vigilant to ensure competition and integrity in the market and set a robust deterrent to breaking the rules." Daniel Maffei both parties in Congress and signed by the president of the United States. The Ocean Shipping Reform Act of 2022 (OSRA-22) lays out specifically what must be done — complete with deadlines — to ensure proper imple - mentation, and the Federal Maritime Commission (FMC) is proceeding forward on our mission. For example, in recent years, carriers and terminal operators have some - times abused detention and demurrage charges that, according to the interpretive rule authored by Federal Maritime Commission Daniel Maffei Chairman fmc.gov Most people have "to-do" lists, but I am in the rare position of having my to-do list written by in earnings over the past two years, ocean carriers have an obligation to invest in the development of operational efficiencies that could minimize supply chain bottlenecks. This could include (but is not limited to) investment in US truck and rail services, building off-dock terminals and depots, increasing services to secondary ports, and investing in terminal developments therein and establishing US flag operations that could offer coastal shipping services. European Association for Forwarding, Transport, Logistics and Customs Services (CLECAT) Nicolette van der Jagt Director General clecat.org Liner shipping and container ports have repeatedly made headline news since 2020 as companies across the supply chain were hit with price hikes and shipment delays. Predictability became a thing of the past. Changes continue to occur, and today we witness that the speed of the decline in exports from China has made the blanking strategies of carriers ineffective at stop - ping the erosion of spot and short-term rates, which are on course to fall below pre-pandemic levels before the end of the year. It has been reported that carriers have suspended a number of services on major east–west trade lanes — probably until mid-January — ahead of the Chinese New Year in an attempt to avoid a collapse in contract rates, along with more radical capacity reduction plans. Service levels have slightly improved, albeit they are still genuinely low. There is no doubt that today we are living not a new normal but a new reality, in which we need to seek to mitigate for risks and ongoing disruptions. Listening to the narratives of the central national banks and the national governments on the changes in their economies they are expecting to make, in particular in the European Union, tells us uncer - tainty is going to stay with us for some time. This will have an impact on the demand for goods and the reluctance to commit to many fixed arrange- ments. With closer attention to the wider economic factors in the way the market is changing and reacting in today's new reality, and with rising interest rates and low consumer confidence, the question remains how this will impact the market situation in 2023. With small to medium-sized enterprises (SMEs) already driven to the spot market with no access to long-term service contracts, it will be interesting to see how many of the larger forwarders and shippers want to commit to the contract rates, and whether there will be a flight back to the spot market because of uncer - tainty and the experiences they have had in 2022. Many will be seeking to come to grips with this situation at a time when there is a need to rebuild trust between the parties in the chain. There is lingering frustration and anger among many customers about carrier behavior over the last few years, and rebuilding cooperation will be essential as supply chains will need to continue to deliver as situations of crisis are to come. In this situation of uncertainty, we should not forget the bigger, long- term picture in times of regulatory reviews. The dramatic changes that have occurred in the container shipping market since the renewal in 2020 have shown that the Consortia Block Exemption Regulation (CBER) has allowed carriers to benefit from important market developments, such as connected digital information services and vertical integration of supply chain functions, at the expense of the users of liner services, and ulti - mately consumers. The ocean shipping market has become significantly concentrated into a field of very few large, global shipping lines following decades of mergers and acquisitions. Currently, the ocean shipping industry has become dom- inated by three mega-alliances comprised of companies that collectively control approximately 90 percent of the liner shipping market. Whereas CLECAT considers that there is value in cooperation between carriers' in "consortia" agreements, to the extent those agreements facilitate effi- ciencies for the benefit of the customers and users of shipping services and bring service enhancements, removal of antitrust immunity — or what is called in Europe a "block exemption" — would not preclude vessel sharing agreements if they are considered pro-competitive and result in operating efficiencies. As customers of the container shipping sector, CLECAT's members have lost confidence that this block exemption generates benefits and that any benefits are being fairly shared. A renewal of this exemption is therefore unnecessary and, we believe, detrimental for EU trade. In addition, the current CBER provides too much interpretative scope for carriers, which protracts urgently needed enforcement actions. Many of these practices are also found in other economies and reinforce the need for the sector's reform and normalization. After the expiry of the CBER there will be a need for guidance on the application of the EU competition rules in the liner shipping sector, given the special features of this industry. We therefore encourage the development of specific guidelines for this sector to ensure that the competition law framework for vessel sharing agreements is transparent, enforceable, and open to scrutiny at times of market stress. CLECAT recognizes that transitioning to a new regime following a repeal of the CBER would need to be managed so as to minimize legal uncertainty and compliance costs for shipping lines, but we believe that with purpose and application there is ample time for this to be accom - plished before the expiry of the CBER in April 2024. "There is no doubt that today we are living not a new normal but a new reality, in which we need to seek to mitigate for risks and ongoing disruptions."