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Dec.14, 2015

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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 and follow him on Twitter: @greg_knowler. GOVERNMENT WATCH INTERNATIONAL | WASHINGTON | CUSTOMS | SECURITY | REGULATION 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

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