FMC KEEPS PRESSURE ON JAPAN, CHINA TO END UNFAIR SHIPPING PRACTICES
The U.S. Federal Maritime Commission has become increasingly impatient with the effort to reform unfair shipping practices in Japan and China, and is considering future actions.
The FMC has the authority under the 1984 Shipping Act and the 1998 Ocean Shipping Reform Act to defend the interests of U.S. shipping in cases of unfair port and carrier practices used by other countries.
In 1997, the FMC found a number of practices that discriminated against foreign carriers operating in Japan.
For years, carriers in the Japan/U.S. trades could not make operational changes without the permission of the Japan Harbor Transportation Association (JHTA), which represents the Japanese waterfront employers. JHTA operates under the permission and regulatory authority of the Japanese Ministry of Transport.
JHTA’s “prior consultation authority” was used to extract fees and impose operational restrictions, such as limits on Sunday work. It also used this authority to allocate work among its members by excluding carriers and consortia to freely choose stevedores and terminal operators. In addition, the Ministry of Transport used a licensing standard which prevented new entrants from entering Japan’s stevedoring business.
The FMC responded by imposing a $100,000 fine per call on all Japan-flag vessels calling at U.S. ports. The actual amount of the fines collected were later negotiated as part of the U.S.-Japan agreement whereby the Japanese government promised to make changes to its port practices.
Changes to Japan’s port practices have so far been slow coming. “The changes that were made appear to have done little to address the substantial obstacles to proprietary carrier terminal operations affecting carriers in Japan,” FMC Commissioner Delmond J.H. Won said Tuesday at the American Association of Exporters and Importers meeting in Manhattan Beach, Calif.
The FMC recently responded by issuing a Section 15 Order requiring certain carriers to provide more information to the agency about the status of competition in Japan’s port activities.
Won said the FMC will intensify its review of “aggressive tactics” used by Chinese carriers in the market. “It’s recently been brought to our attention that the Chinese carriers have been engaging in aggressive pricing programs to gain market share and it’s fairly well known that the Chinese carriers have been experiencing abnormally rapid growth in their market share,” he said.
The shipping act states that no controlled carrier may maintain or charge or assess rates that are below a level that is just and reasonable. The FMC plans to conduct an comprehensive analysis into the Chinese carrier’s rate strategy.
“Even assuming that the FMC is able to determine that the rates of the aggressive Chinese carriers are unreasonable, the only authority we have is to suspend the rates,” Won said.
The FMC initiated a proceeding under Section 19 in 1998, regarding possible restrictive practices in China. Information demand orders were sent to Sea-Land, APL, COSCO and Sinotrans.
The main restrictive practices identified by the FMC in the U.S./China trade were:
* Chinese regulations prohibiting non-Chinese vessel operators from creating branch offices in locations other than port cities at which they or their carrier partners have regular vessel calls resulting in their inability to directly serve inland customers.
* Chinese regulations limiting the types of entities which can create vessel agency operations to Chinese, state-owned entities. That essentially requires non-Chinese liner operators to employ vessel agents that are subsidiaries of their Chinese competitors.
“The FMC is hopeful that the Chinese government will soon resume negotiations of a bilateral agreement for maritime services with the U.S. so we can avoid getting into a contentious proceeding as happened with the Japan situation,” Won said.
Most recently, China implemented rules to monitor tariffs for ocean carriers and non-vessel-operating common carriers conducting business in the country. “The FMC will, of course, continue to keep a close eye on this matter,” Won said.