Shippers, forwarders challenge Oceania VSA changes
American shippers and freight forwarders involved in the Pacific Southwest/Australia/New Zealand trade believe that recently proposed changes to a vessel sharing agreement may lead to anticompetitive liner carrier behavior and want the U.S. Federal Maritime Commission to fully review the amendments before signing off on them.
In the June 11 Federal Register, the FMC published a notice that the U.S. Pacific Coast-Oceania Agreement had proposed to amend the agreement to:
' Terminate the PSW-2 string from the agreement.
' Revise allocations on the two remaining service strings.
' Add language reflecting the payment of liquidated damages.
Both the National Industrial Transportation League and National Customs Brokers and Forwarders Association of America are concerned about the proposed provision to add a liquidated damages enforcement mechanism. They say this move could result in an unreasonable reduction in transportation service and an unreasonable increase in transportation costs.
'Unlike most VSAs that increase competitive alternatives, the Oceanic proposal seeks antitrust immunity for the participating members, to both reduce capacity in the trade and to establish a self-policing mechanism that is designed to ensure that none of the member lines compete in this trade with the two vessel strings that remain,' wrote Edward D. Greenberg, counsel to the NCBFAA, in a letter this week to the FMC.
'This concern is even more problematic since the NCBFAA understands that the members of this agreement constitute virtually 100 percent of the capacity in this trade,' Greenberg said. The Oceanic agreement's members are ANL Singapore PTE Ltd., A.P. Moller – Maersk, CMA CGM, Hamburg-S'd and Hapag-Lloyd.
'Depending upon the amount of the penalty to be paid, we believe that the amendment could potentially have significant anticompetitive effects that would adversely impact shippers and receivers of goods transported in the involved trade,' said Peter J. Gatti, executive vice president of NIT League, in a letter to the FMC. 'For example, if the liquidated damages to be paid are hundreds of thousands or even tens of thousands of dollars, the incentive among the carrier members not to compete will be very strong.'
The NIT League asked the FMC to delay implementation of the proposed agreement until it is able to determine whether the carrier members have agreed upon the damages amount that must be paid by a party that breaches the requirement not to compete.
The NCBFAA urged the FMC to 'look carefully at both the proposed amendment and the existing agreement and require that the members provide information concerning the likely effects of the amendment, whether the amendment results in any improvement in vessel service, why it does not result in an unreasonable reduction in service or an unreasonable increase in rates, and why the non-compete provisions of the agreement would be the only reasonable method by which the VSA can operate.' ' Chris Gillis