FMC’s Dye: Regulatory differences will remain
Federal Maritime Commissioner Rebecca Dye said Thursday while she supports moving shipping “forward on the deregulatory path” differences likely will remain between how the industry is regulated in the United States and Europe.
“However the EU ultimately decides to treat the international liner industry, and in the case of consortia that is still an open question, I expect the U.S. will continue to rely on certain aspects of our current ocean regulatory system for several reasons,” Dye said in remarks prepared for a liner shipping conference in London sponsored by Containerization International.
“The potential chilling effect of exposure to U.S. antitrust law is considerably greater than to EU competition law,” she said.
Without antitrust immunity for the industry, in the United States “there is the threat of treble damages for violation and the fact that private parties may also bring antitrust actions,” she said. “U.S. antitrust laws are also criminal statutes. Executives of companies found guilty of violating these laws can face substantial jail terms and fines.”
Dye also spoke about shipping regulation in Asia, noting that the transportation working group of the Asia-Pacific Economic Cooperation late last year released a consultant's report on non-ratemaking agreements that concluded, “such agreements have the potential to provide important operating efficiencies and improved quality of service to customers.
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“They also proposed several guidelines for the regulation of those agreements, including that, ‘APEC member economies do not subject non-ratemaking agreements to a market share test based on pre-defined threshold levels,’ ” Dye said.
“My hope is that, as the EU and APEC proceed, they share with each other their research findings, economic concerns and policy perspectives. A multilateral perspective really is crucial,” she added.
Dye repeated her opinion that “it is time to revisit the traditional notion of tariff filing and enforcement.” Dye has said she thinks the practical usefulness of tariffs is ending since almost 90 percent of freight carried to and from the United States is under contract.
She thought it “unwise to consider major, comprehensive reform under current economic condition. Under present market conditions, neither rate levels nor vessel space availability appears to be a problem for U.S. shippers.” She noted her remarks reflect her own views, not necessarily those of her fellow commissioners.
The Ocean Shipping Reform Act of 1998, “successfully and substantially deregulated ocean transportation in the U.S. trades,” Dye said, noting that widespread use of confidential service contracts has led to a decline in conferences with binding rate authority falling from 34 before OSRA to seven last year.
“Of that seven, three are limited to discussion of government cargos, two are dormant, one is a two-member conference that exists mainly to allow joint contracting, and one is a two-member conference concerned with inland shipping services,” she added.
Carrier conferences have been largely replaced by rate discussion agreements with 27 operating in U.S. trades today, she said.
“They neither regulate, nor have access to the terms of their members' service contracts,” Dye said. “As compared with traditional conferences of the sort that the EU banned last October, or that existed in U.S. trades before the reform act was enacted, these discussion agreements have rarely been the subject of shipper complaints in the U.S.”
An exception was the negative reaction by shippers to a proposal in December by the Transpacific Stabilization Agreement to discuss and develop a possible capacity coordination program. Dye noted that after the FMC decided not to grant expedited review and to delay implementation of the proposed agreement, the TSA withdrew the proposal.
Dye said liner shipping, like other sectors is “facing the most significant economic challenges of at least a generation” with dramatic drops in volumes and overcapacity growing so that 400 containerships are in lay-up.
“The average age of the world's container fleet is now only nine years old, the lowest among all vessel types,” she observed. “This makes it extremely difficult for vessel operators to gain additional efficiencies from vessel operations.”
Dye noted that in addition to introducing confidential contracting, and eliminating conference regulation of members' service contracts, OSRA liberalizing the terms under which the FMC can, on its own initiative, exempt entities that are subject to the Shipping Act from particular regulatory requirements, as when it allowed non-vessel-operating common carriers to offer the equivalent of service contracts, or NVOCC Service Agreements (NSAs). This authority could allow the FMC to look at the continued need for tariff filing.
“I believe the commission, under section 16 of the shipping act, has the authority to exempt vessel operators and non-vessel-operating common carriers from the tariff publication provisions in the shipping act. The Ocean Shipping Reform Act broadened the commission’s exemption authority for actions such as this,” she explained.
Dye's full speech is available here. ' Chris Dupin