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Aug.22, 2016

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INTERNATIONAL MARITIME IMPORTING | EXPORTING | PORTS | CARRIERS | BREAKBULK | GLOBAL LOGISTICS 16 THE JOURNAL OF COMMERCE AUGUST 22.2016 RAIL SHIPPERS WRANGLED with widespread disruption in the mid-1990s caused by the mergers of U.S. railroads Union Pacific and Southern Pacific, and Burlington Northern and Santa Fe. The disruptions spurred a federal moratorium on rail mergers, squashing a proposed merger of the Bur- lington Northern Santa Fe and Canadian National railways in 2000. Mergers can be equally perilous on the ocean, as shippers hit with computer glitches that sullied Maersk Line's $2.7 bil- lion acquisition of P&O Nedlloyd can testify. The bungle cost the largest container lines customers and some executives their jobs. That's why the relative absence of dis- ruption among recent container shipping mergers is a change; shippers impacted by deals such as Hapag-Lloyd/CSAV or Ham- burg Sud/CCNI didn't complain about lost containers, breakdowns in IT connections or an inability to evacuate containers from terminals. Some of the major carrier con- solidations finalized or under way in 2016 have yet to be fully implemented; CMA CGM-APL and Hapag-Lloyd/United Arab Shipping Co. are yet to be fully integrated, and problems still could develop. But in the case of Cosco and China Shipping, which officially became one organization in February and began its integration on March 1, there have been relatively few signs of disruption to shippers' cargo. Competitor carriers in the U.S. have acknowledged as much, meaning they saw little to no oppor- tunity to pick up business from a carrier going through a potentially difficult phase. According to Cosco Shipping Lines in Secaucus, New Jersey, integration of the carriers' overseas networks began in mid- April; May 1 saw the final integration of the two companies' networks in China, includ- ing global systems and facilities; and the two carriers' routes were consolidated May 15. "Clearly, combining the people, pro- cesses and protocols of two massive global systems will have inherent challenges and bumps in the road, and we have had our share," said Howard Finkel, executive vice president of Cosco Container Lines. "I have to say, though, that overall the process was planned with enough foresight to allow the team to anticipate issues and be ready with solutions. "One of the largest challenges was to ask customers loyal to two different carriers to bring their business to what is essentially a third, new carrier," Finkel said. The company experienced a dip in mar- ket share in U.S. imports during the first seven months of the year. From January through July, the combined company's vol- umes in 20-foot-equivalent units were up 1 percent, according to the company. Total U.S. imports in TEUs were forecast to be up 2.73 percent, according to PIERS, a sister company of The Journal of Commerce within IHS Markit. Forwarders in Asia also shot down rumors of a massive defection of shippers following the integration. Finkel said China Shipping had active contracts that were refiled as a Cosco tariff to take effect until the end of July. "When something like this happens, shippers tend to ship on contracts where there's no change happening until the dust settles. I think we proved to most of the shippers who were apprehensive, that they would be seeing the same, if not improved, service, and a lot of these shippers have now switched their contracts to the new company," he said. But like shippers of most of the major carriers with the exception of the 2M Alli- ance of Maersk Line and Mediterranean Shipping Co., customers of Cosco and China Shipping will have to weather the transition from the current alliances the two carri- ers participate in — Cosco in the CKYHE Alliance and China Shipping in the Ocean Three — to a new alliance lineup in which the combined Cosco-China Shipping will lead the Ocean Alliance, along with OOCL, CMA CGM and Evergreen. The Ocean Alli- ance will take effect on March 1, 2017. JOC COSCO-CHINA SHIPPING LINKUP GOING SMOOTHLY Mergers of large transportation organizations often create massive headaches for shipper customers Photo: Sheila Fitzgerald /

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