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Sept.19. 2016

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GOVERNMENT WATCH INTERNATIONAL | WASHINGTON | CUSTOMS | SECURITY | REGULATION 32 THE JOURNAL OF COMMERCE www.joc.com SEPTEMBER 19.2016 By Mark Szakonyi TH E FE D E R A L M A R ITI M E Commission's decision to pause its review of the Ocean Alliance so it could question members may be about more than just concerns with col- lective contracting of third-parties, and could be because of a lack of details on services and how the major vessel-sharing agreement would be coordinated. Commissioner William Doyle took issue with language that would allow alliance members China Cosco Shipping Lines, CMA CGM, APL, Evergreen Line and Orient Overseas Container Line to jointly contract for third-party services, such as stevedores, tugboat operators, and suppliers. He pointed to how the 2M Alliance amended its VSA to restrict joint purchasing, ensuring fair deal- ing, and providing frequency. "I pay special attention to competition matters, especially to small businesses, downstream par- ticipants and the upstream — supplier and vendor markets," Doyle said in a statement. The commissioners' decision to stop the clock on the review of the alliance, how- ever, also might be due to a lack of details on services to be deployed, the amount of capacity operated, and how it will be coor- dinated from its planned Hong Kong offi ce. Compared with other alliances such as the CKYHE or G6, which got the go-ahead from the FMC, the Ocean Alliance's July 15 fi ling lacks such specifi cs. More than a dozen US import- ers told The Journal of Commerce they are concerned about how the new phase of alliances will roll out in the spring, and they want details on strings to be deployed by the Ocean and the THE alliances. That uncertainty has only intensi- fi ed in recent weeks with the collapse of South Korea's Hanjin Shipping, one of the six members of the THE Alli- ance along with MOL, NYK Line, "K" Line, Hapag-Lloyd, and Yang Ming Line. Other alliances are also in fl ux. Hyundai Merchant Marine, South Korea's other carrier, plans to join the 2M Alliance along with Maersk Line and Mediterranean Shipping Co., though the trio has yet to fi le a revised VSA with the FMC. The Ocean Alliance, set to launch in April, would have the dominant capacity position on the two largest trades, with a nearly 35 percent share of the Asia-North America trade, and a roughly 39 percent share of the Asia-Europe trade, according to shipping analyst Alphaliner. The THE Alliance also is expected to set sail in April. There are reasons, however, why service and deployment information isn't available yet. Unlike adjustments to existing alliances, where the members are familiar with each partner and their needs, the Ocean and THE alliances in many cases are bringing together carriers that have never before worked with each other. That makes vastly more complicated and time-consuming the inevitable process of horse trading on sched- ules, port calls, terminal selection, and other details, many of which can't be decided by committee and must be elevated to the C-suite for resolution. There's still plenty of time for Ocean Alli- ance members' to satisfy requests after FMC Chairman Mario Cordero and commission- ers Doyle, Michael Khouri and Daniel Maffei voted to stop the clock on the review in late August. Commissioner Rebecca Dye voted to withhold her vote until she received a com- pleted competition analysis. After the FMC receives responses from carriers, its 45-day review will restart. Using the Shipping Act of 1984, commissioners are determining whether the VSA would likely cause an unreasonable decrease in service or unreasonable increase in cost. Vessel- sharing agreements prohibit joint sales and marketing, allowing members only to cooperate on operations in order to pool their larger ships together so economies of scale can be achieved via fuller loadings. The FMC has yet to reject a VSA. The outlook for the alliance receiv- ing approval from European and Chinese regulators also looks good. Only one major VSA has been rejected by reg ulators: Beijing rejected a tie-up of the top three global container lines in terms of capac- ity — the P3 Network — which the U.S. and European Union had approved. JOC Contact Mark Szakonyi at mark.szakonyi@ihsmarkit.com and follow him on Twitter: @szakonyi_joc. IT'S ALL IN THE DETAILS The FMC's delay in reviewing the Ocean Alliance underscores a lack of details in carriers' new networks ASIA-EUROPE THE Alliance 27% Ocean Alliance 35% 2M + HMM 34% ASIA-EUROPE 2M + HMM 20% Ocean Alliance 40% THE Alliance 34% TRANS-PACIFIC TRANS-PACIFIC www.joc.com Source: Alphaliner Ocean Alliance would have most capacity on largest east-west trade lanes when it begins in April 2017 pending regulatory approval. The share by alliance is estimated based on capacity operated by individual member carriers as of June 1, 2016. OCEAN ALLIANCE SET TO DOMINATE ASIA-EUROPE AND TRANS-PACIFIC

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