China’s Ministry of Transport is also concerned about recent growth in shipping surcharges, according to the Federal Maritime Commissioner William P. Doyle, who recently returned from bilateral maritime talks in China.
Federal Maritime Commissioner William P. Doyle, back from bilateral maritime talks in China last week, says officials there have “strong sensitivity” about how a planned merger between the country’s major liner companies will affect shippers.
He also said Chinese officials are concerned about the growing share of ocean transport costs that are represented by surcharges.
Doyle was briefed by officials from COSCO and China Shipping who told him they are in the “beginning stages” of a merger.
“There’s no question that whatever they do they don’t want this to harm their customer base,” he said.
The two sate-owned Chinese companies belong to different ocean carrier alliances: COSCO is part of the CKYHE Alliance with “K” Line, Yang Ming, Hanjin, and Evergreen, while China Shipping is part of the Ocean3 Alliance with CMA CGM and United Arab Shipping Co. Doyle said the two companies told him they still are not sure how they will handle their alliance affiliations.
He urged the companies to come to the FMC to discuss how the merger would affect their companies and the alliances and if some sort of “transition phase” is needed.
Doyle told the carriers, “Come on into the FMC, our doors are open, let’s sit down, we’ll talk about this, we’ll go to the staff, let’s have plenty to time to discuss these matters because they’re not insignificant. And they agreed, they’re fine with that.”
He expects that the companies will meet with the FMC in about a month.
Doyle noted that the alliance picture has become even more complicated with Neptune Orient Lines announcing over the weekend that it is discussing a possible acquisition by CMA CGM or Maersk.
NOL’s APL liner company is a member of the G6 Alliance with Hapag-Lloyd, Hyundai Merchant Marine, MOL, NYK and OOCL, while Maersk has partnered with MSC to form the 2M Alliance.
“There are a lot of moving parts this point, post even my meeting out there,” said Doyle.
One subject that will be of interest to U.S. regulators if NOL is acquired, according to Doyle, is the future of APL’s U.S.-flag fleet. APL is one of the few container liner carriers with U.S.-flag ships. It recently consolidated six of them into new string aimed at being even more attractive to commercial shippers moving goods to the U.S. by offering a rapid transit time of 13 days from Shanghai to Los Angeles.
Doyle also met with China’s Ministry of Transport, which he said is “really starting to take an interest in the different kinds of surcharges that the carriers put on the cargo,” including bunker adjustment factor (BAF).
“I gave them a full briefing on what’s going on in the U.S. with respect to demurrage and detention, what the FMC is doing, I explained to them we’re not taking any concrete regulatory actions right now in the form of rulemaking, but we are paying attention to it. I gave the example of the port congestion surcharge that the carriers tried to put on last year and how the FMC stepped in and said, ‘listen you need to reconsider this with the cargo tender rule and the carriers backed off that.”
Chinese officials told him some of their exporters “don’t have the market power that a large shipper would have and we’re going to ask for some relief on this.”
Surcharges were one of the areas highlighted this March when a new group called the Global Shippers Alliance was formed by European Shippers’ Council, Asian Shippers Association and the American Association of Exporters and Importers. A delegation from that group contended, “Dozens of indistinct surcharges usually amount to more than the naked transport price,” according to an account posted on the European Shippers Association website.
China’s Ministry of Transport told Doyle that surcharges were about 20 to 25 percent of carrier revenues three years ago, but today that share has risen to 40 to 45 percent and that the ministry plans to take action to reduce that.
COSCO, China Shipping ‘sensitive’ to shipper concerns about merger
