SINGAPORE WILL EXTEND its block exemp-
tion order for liner shipping agreements for
another five years until December 2020, its
Ministry of Trade and Industry announced.
The decision was widely expected and
comes after a public consultation by the
Competition Commission of Singapore and
its recommendation to renew the existing
exemption from antitrust regulations.
The block exemption order, first issued
in July 2006, exempts a category of liner
shipping agreements from the prohibition
against anti-competitive agreements under
Section 34 of the Competition Act. Those
include non-mandatory adherence to tariffs,
and allowing liner operators to enter into
individual confidential contracts and offer
their own service arrangements.
Esben Poulsson, president of the Sin-
gapore Shipping Association, said any
help
that could be given to an industry as
important to free trade and globalization as
container shipping should be welcomed. "It
is self-evident that the dismal state of the
global container market and the extremely
low box rates being paid clearly prove that
whatever help the industry can be given at
this point will be most welcome," he said.
"These historically low rates illustrate just
how competitive the market is and highlight
how any talk of this measure being anti-
competitive, is just plain wrong."
In the meantime, the Hong Kong Com-
petition Commission will not take any
action against industry sectors that have
applied for a block exemption from the law
that takes effect on Dec. 14 until the applica-
tions have been reviewed, according to the
city's liner shipping lobby.
Roberto Giannetta, secretary general of
the Hong Kong Liner Shipping Association,
said shipping lines will be allowed to con-
tinue the status quo until the commission
concludes its investigation into whether the
sector qualifies for a block exemption.
This provides a measure of relief to
the container shipping industry in Hong
Kong, where more than 95 percent of liner
shipping activity involves vessel-sharing
agreements that will be outlawed once the
competition law is in place, with penalties
of up to 10 percent of a company's revenue.
"We see this as a positive sign that the
Hong Kong Competition Commission rec-
ognizes the value of collective undertakings
that have historically been permitted under
most country competition laws, and that
they are looking at ways to enable shipping
lines to continue their model of business
uninterrupted after Dec. 14 and while the
exemption application review is still pend-
ing," he told The Journal of Commerce.
Pressure has been mounting on the
Competition Commission from all affected
industry sectors, and dire predictions have
been made about the impact of rejecting the
shipping application for an exemption order.
The Hong Kong Container Terminal
Operators' Association warned in June that
the transshipment business could easily be
shifted to Shenzhen, a chilling scenario for
the port that was also raised by Maersk
Line's then-CEO of North Asia Tim Smith
in August (he is now North Asia regional
CEO for Maersk Line as well as chairman
of Maersk China).
Hong Kong has evolved from a port
handling direct China exports to a major
transshipment hub with more than 70 per-
cent of its throughput comprising cargo in
transit. This type of cargo was highly por-
table and could easily move to Shenzhen if
there was no clear way forward regarding
the implementing of the new competition
law, Smith pointed out.
It's a view shared by Jessie Chung, chair-
man of the HKCTOA. "Shipping lines can
easily move the transshipment business
from Hong Kong to other terminals across
the border," she said.
Giannetta said the HKLSA wasn't
accepting applications for block exemp-
tions until the commencement order took
effect on Dec. 14, and only at that time will
the liner association be able to submit an
application for exemption of carrier coop-
erative agreements covering Hong Kong on
behalf of the container carrier industry.
JOC
Contact Greg Knowler at greg.knowler@ihs.com and
follow him on Twitter: @greg_knowler.
GOVERNMENT WATCH
INTERNATIONAL | WASHINGTON | CUSTOMS | SECURITY | REGULATION
www.joc.com THE JOURNAL OF COMMERCE 19
By Greg Knowler
BLOCK EXEMPTIONS
TO STAY FOR NOW
Singapore allows carrier alliances through 2020, while
Hong Kong will keep status quo during investigation
