Chain reaction?

Chain reaction?   
The first in a line of dominoes, or the exception in a confusing time?
   Japanese ocean carrier MOL's decision in late October to leave two of the liner shipping industry's most powerful bodies in a matter of days has left a lot of unanswered questions heading into 2009.
      The moves were precipitated by the end of Europe's antitrust block exemption for liner carriers in mid-October, with MOL making it clear it didn't want to run afoul of competition laws. MOL's resignation from TSA was effective Nov. 27.
   The carrier said at the time of the announcement that it didn't want to play by two sets of rules – one for trades to and from Europe and another for the rest of the world. A statement by Masakazu Yakushiji, executive vice president in charge of MOL's liner division, crystallized the carrier's concerns.
   'With the European Union's abolition of liner antitrust immunity, it has become extremely difficult to align the business processes of our entire organization when its regional divisions must operate to differing standards,' he said. 'Having done a thorough analysis of marketplace dynamics and the roles of the TSA relative to our unique ability to differentiate, we concluded MOL and its customers would be better served by conducting business independently from transpacific liner agreements.'
   The question now is whether other TSA member lines feel the same. And, perhaps more importantly, whether they're able and willing to do the same.
   In the month that followed MOL's announcement, precious little noise came from TSA's other members regarding the decision. A handful of carriers contacted for this article said they wouldn't speculate on the activities of other TSA carriers.
   'OOCL is still a member of the Transpacific Stabilization Agreement and European Liner Affairs Association,' the Hong Kong-based carrier said in an e-mail to American Shipper, similar to responses from most carriers. 'OOCL cannot comment on other members' decisions to terminate their membership.'
   But the concerns that prompted MOL to leave aren't going away anytime soon. Carriers are operating by different rules all over the world. There's the liner conference ban in Europe, the U.S. Ocean Shipping Reform Act (and a similar system in Canada), and looming regulatory reform in some of Asia's biggest economies.
   China in August enacted a new anti-monopoly law that shippers hope holds the key to busting liner conferences operating in the world's most important cargo producing country (see related story). The law says nothing specifically about whether or not it pertains specifically to liner carriers.
   Hong Kong is contemplating a similar competition law, while the nascent Competition Committee of India appears ready to quell conferences operating out of the Subcontinent.
   At the same time, there are places where conferences still hold sway – such as Singapore, which as recently as 2006 reinforced an antitrust block exemption for ocean carriers.
   MOL wasn't the only carrier to come to the conclusion that carrier associations, in whatever form, might not be safe. Atlantic Container Lines, which operates five services from the U.S. East Coast to Europe and North Africa, dropped out of the ELAA earlier this year.
   'Basically there was no benefit,' Andy Abbott, ACL's chief executive officer, told American Shipper in November. 'They were talking about an exchange of information, but in the U.S. trade, we have PIERS data. You can basically get whatever you're looking for. When it comes to statistical information, maybe you can't get info between the Seychelles and Morocco, but for the major trades, you're up to your ears in data. We just didn't see the need to be involved anymore. Obviously MOL came to the same conclusion and I think others will probably see that over time.'

Abbott

   In the post-EU liner exemption world, the ELAA has transitioned from being a lobbying body – mostly in response to the efforts of the European Shippers' Council to ban liner conferences – to one that is promoting the benefits of allowing carriers the ability to seek joint efficiencies that don't cross the line of anti-competitiveness. While ACL and MOL have left, ELAA's roster has swelled in recent months to nearly 30 carriers.
   As Lloyd's List pointed out in November, the group's role includes a plan to compile and publish supply-and-demand data on a trade-by-trade basis, as well as a price index.
   Neither the TSA nor ELAA would elaborate much on MOL's departures, saying they do not speak on matters involving individual carriers.
   ELAA Executive Director Chris Bourne (ironically the former managing director of MOL Europe) told Lloyd's List he would not comment on individual members other than to say that, under the association's rules, lines could only tender their resignations at the end of the year, as well as giving six months' notice.

Bourne

   The TSA said MOL's decision doesn't seem to have had an effect on other members.
   'There isn't much to report from this end,' TSA spokesman Niels Erich said. 'We defer to MOL's own comments regarding its decision to resign, and we have not had any indication from other TSA carriers, including alliance partners, of similar concerns or intentions to leave the agreement.'
   MOL had been a member of both the 15-member TSA and the Canada Transpacific Stabilization Agreement (from which it also resigned) since their beginnings in 1989, but left from the westbound discussion agreements in June 2005.
   Ed Huebbe, a spokesman for MOL, said the change would give the company more flexibility in pricing and in other aspects of its business. He stressed that the company was not seeking to slash rates.
   MOL and its alliance partners Hyundai Merchant Marine and APL operate a transpacific loop called APX that extends to Europe via the Panama Canal.
   'The APX partnership with HMM-APL had nothing to do with the decision,' Huebbe said in an e-mail to American Shipper when asked whether the APX service's connection to Europe played any part in the decision to leave the TSA. 'That partnership is in line with present EU consortia regulations, which is valid until 2010. The primary reason for the TSA resignation was for MOL to have a completely risk-free operation from a legal standpoint, even though we had not found anything illegal relative to the TSA and its members' activities.'
   Huebbe said MOL will remain a member of the New World Alliance with Hyundai and APL, and will also remain a member of discussion agreements covering other trades, such as the Intra-Asia Discussion Agreement.
   'The reasons MOL carefully set out for its resignation are interesting,' said Francis Phillips, of American Shipper sister company ComPair Data. 'MOL has also left the Europe/West Africa trade coincident with EU regulation changes and the (Europe West Africa Trade Agreement) conference being forced to close down. MOL took slots with CMA subsidiary Delmas in that trade.'
   Phillips said MOL's departure could set the stage for some posturing between the EU and the lines still in the TSA for services that connect from Asia to North America and then to Europe.
   'All the other TSA-CTSA discussion agreement members (except Mediterranean Shipping Co. and China Shipping Container Lines) have similar single specimen direct transpacific/Europe scheduled connections,' he added. 'Maersk takes transatlantic slots on APX and has two other Pacific/Europe loops of its own (one via Panama and one via Suez). So this could well be the start of a carefully orchestrated jurisdictional squabble with the EU shaping up.'
   Abbott, who noted that ACL was a member of conferences since the line was founded, said that conferences forever changed when OSRA came into effect governing U.S. trades in 1998.
   'That's when the conference system died,' he said. 'All the conferences have been doing is setting tariff rates and bunker surcharges and the members aren't even sticking with the tariffs. It had basically turned into a methodology to set up a bunker surcharge formula. The horse had already left the barn (by the time the conference ban went into effect in October). Coming out of the conference world, it's hard for people to recognize the game's over.'
   The EU ban has had 'absolutely zero' effect on ACL's business, he said. The only thing he'd like to see is an end to the filing of tariffs and contracts with the U.S. Federal Maritime Commission on trades to and from Europe.
   'There's no benefit to the customer or the carrier,' Abbott said. 'It's just an added cost and headache.'
   ACL, in making its decision to leave the ELAA, was also concerned about the environment that the European regulations had created. In the 1990s, ACL was involved in an investigation regarding the Trans-Atlantic Agreement, something Abbott said he wanted to avoid repeating.
   'You put people in a room together and you don't know who has heard what,' he said. 'Somebody hears something and you're caught in a Brussels investigation. As an organization, you can't know when one person talks to another person and it affects the entire company. We went down that road with Brussels with the TAA. The risks outweighed the positives.'
   And Abbott said that carriers should at least be thankful the EU gave the industry time to transition. 'They didn't close the door overnight.'