FMC’s Doyle: ‘THE Alliance’ creates safeguards in case a member goes bankrupt

FMC Commissioner Doyle says provisions in new vessel sharing agreement could protect other members in the event of a Hanjin-like bankruptcy.    Federal Maritime Commissioner William P. Doyle said “THE Alliance” has created safeguards in case one of its members goes bust.
   THE Alliance, slated to launch next April, is the vessel sharing agreement that is currently being reviewed by the Federal Maritime Commission (FMC) and consists of ocean carriers “K” Line, MOL and NYK of Japan, which plan on merging their container operations; Germany’s Hapag-Lloyd; and Yang Ming of Taiwan.
   Speaking at the semi-annual meeting of the North Atlantic Ports Association in Alexandria, Va. on Thursday, Doyle said that in the wake of the Hanjin bankruptcy, he has advocated that alliance members provide safeguards in case more liner carriers decliner bankruptcy in the future.
   “Having said that, for the first time, we are seeing an alliance agreement attempt to make forward projections on ways in which to deal with a failed carrier in an alliance – or – more importantly, how the non-failing carriers can help the failed carrier’s shippers and other customers.”
   In its publicly filed proposed vessel sharing agreement (FMC No. 012439, Section 7.4), Doyle said THE Alliance has inserted “framework language” about how the other members of an alliance could deal with a carrier in financial trouble – what the agreement terms an “Affected Party.”
   The agreement says if the other carriers in the alliance are unanimously of the opinion that a carrier’s financial problems may be detrimental to their service, or that parties may not be paid or that payment will be delayed, they can end participation of the troubled carrier in THE Alliance or suspend its membership.
   Doyle said these other carriers could:       
     • Directly make arrangements with entities providing vessels or space to the affected party that are used by the alliance;
     • Directly make arrangements with the affected party’s agents or subcontractors;
     • Take other actions to facilitate the movement of cargo carried by the affected party to the intended port of discharge or other locations;
     • Discuss and agree on other measures that are necessary to maintain continuity of operations and facilitate the orderly movement of cargo.
   “I have had direct discussions with principals of THE Alliance on this particular provision,” Doyle said. “Though the details have not been completely worked out, the intent in part is to set-up a per se catastrophic instrument that could be used when an individual member liner fails in the network.
   “Thus, in theory, if a funding mechanism were to be set up, then funds could be used to pay operational expenses to bring ships into port and unload containers to ensure that cargo is not stranded on the water.”
   Doyle noted the Ocean Alliance is allowed to jointly negotiate as an alliance with marine terminals who agree to do so. The Ocean Alliance is scheduled to take effect next April between CMA CGM and COSCO of China; Taiwan’s Evergreen Line; and OOCL of Hong Kong.
   “Some marine terminal operators and port authorities may want to explore options for entering into their own alliances where they could jointly negotiate terms and conditions with the ocean carriers,” Doyle said. 
   He noted how last year, the ports of Seattle and Tacoma formed the Northwest Seaport Alliance, covering activities such as negotiating, setting and approving all terminal rates, charges, rules and regulations; along with rates of return between the terminals (internally).
   On Nov. 16, an agreement called the Miami Marine Terminal Conference Agreement was filed with the FMC and is now under review by the commission.
   He said the agreement contains clauses that would allow the conference/rate-setting authority to discuss and agree on matters of rates, charges, rules, and regulations through joint or individual marine terminal operator agreements with ocean common carriers. Another section would authorize the members to meet individually or as a group with one or more users (including ocean common carriers).
   While not their sole focus, he said these sections “would appear to allow the terminals to jointly meet with a group of ocean common carriers (like an alliance grouping) and come to a joint agreement for services.”