FMC grants ‘THE Alliance’ approval for U.S. trades

The U.S. maritime regulator granted the five-member ocean carrier alliance approval to take effect Dec. 19.    The Federal Maritime Commission (FMC) on Wednesday approved a proposed liner carrier consortium of five ocean carriers for their planned services to and from the United States.
   The FMC’s decision, which was made in a closed session during the agency’s final meeting of 2016, allows “THE Alliance” to become effective Dec. 19.
   THE Alliance, announced in May, is composed of Hapag-Lloyd of Germany; Taiwan’s Yang Ming; and “K” Line, MOL and NYK of Japan. Also included in initial plans for THE Alliance was Hanjin Shipping before the South Korean carrier filed for insolvency in August.
  “I am very cognizant of the concerns industry stakeholders had regarding provisions in this agreement, particularly those related to information sharing and joint procurement,” FMC Chairman Mario Cordero said in a statement. “This office will continue to carefully focus on the impacts of the carrier alliance restructuring that is taking place in the shipping industry. Considerable review and analysis goes into assessing a final agreement before it is allowed to go into force.”
   Just last month, the three Japanese members of THE Alliance said they would combine their liner carrier divisions under a single entity.
   Through the new alliance, the carriers said last month they plan to call over 75 ports in the Far East, North Europe, the Mediterranean, the United States, Canada, Mexico, Central America, the Caribbean, the Indian subcontinent and the Middle East.
   THE Alliance formed in the aftermath of a musical chairs of realignment in carrier alliances and consolidation that has only continued in the second half of 2016. The grouping was nicknamed by some analysts as the “orphan alliance,” since it was made up of carriers left on the sidelines by the formation of the Ocean Alliance, which brought together carriers from three previous alliances (the Ocean 3, G6 and CKYHE). The Ocean Alliance members are CMA CGM, COSCO, OOCL and Evergreen. Maersk and MSC have their own alliance, the so-called 2M, and earlier this week, they reached an agreement for limited space sharing with Hyundai Merchant Marine.
   Commissioner William P. Doyle, who also highlighted the language dealing with contracting, said, “After receiving substitute language from the parties, key authorities in THE Alliance Agreement are now directly on par with authorities contained in the other second generation alliance agreements of 2M and the OCEAN Alliance.
   “This follows the framework I have supported whereby alliance members must negotiate independently with American businesses such as tugs, barges, stevedores, chassis providers, container equipment lessors, bunker suppliers and other third-party service providers in the U.S,” Doyle said.
   “On commercial matters, THE parties can gain significant efficiencies by jointly discussing operational matters. I believe this balances the ocean carriers’ economic needs to gain operational efficiencies, while the FMC exercises its duty to foster a vibrant domestic maritime sector for the American businesses, families, and workers that rely upon it,” he added.
   Doyle said the alliance can “jointly negotiate with marine terminal operators who agree to such an arrangement. Looking forward, some ports and MTOs may wish to file their own agreements with the Commission, permitting them to jointly negotiate as a group with the ocean carrier alliances.”
   Doyle noted how Hanjin’s insolvency served as a wake-up call to carriers and shippers. The liner carrier consortium’s efforts to establish a back-up plan to keep cargo moving in the event of another carrier bankruptcy illustrates that carriers and alliances have heard the concerns of the shipping public and are working to create commercial solutions to address those concerns, he explained.
   “With the three second generation alliances now in place (2M, Ocean Alliance and THE Alliance) and set to be fully-functioning in the coming months, the Commission will engage in a thorough monitoring program of the alliances,” Doyle said. “Further, it is an important responsibility of the industry to engage with the FMC if there are improvements or changes that could be made to help foster a fair and efficient ocean transportation supply and export system.”