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Signals™ Headlines - May 3, 2013

Transpacific Stabilization Agreement Merger Approved by FMC, Effective April 14, 2013

Carrier members of the Transpacific Stabilization Agreement (TSA), FMC Agreement No. 011223, serving the East Asia/USA trade lane have finalized a proposal with the U.S. Federal Maritime Commission (FMC) expanding TSA’s scope to include the entire transpacific round trip, including the westbound trade. The amendment to TSA Agreement No. 011223, Amendment 011223-048, entered into effect on April 14, 2013.

It is expected that with the onset of the amendment, the lines will suspend activities of the existing U.S.-Asia carrier group, the Westbound Transpacific Stabilization Agreement (WTSA). Member carriers of the WTSA, FMC Agreement No. 011325, serve the U.S. export trades from the United States to East Asia.

According to published reports, the TSA carrier members represent over ninety percent of the container capacity in the eastbound transpacific market, while the WTSA, which has only eight members, represents a significantly smaller share in the westbound transpacific market. A merged TSA/WTSA has fifteen carrier members serving the transpacific westbound trade; these carriers now control about ninety percent of this trade lane’s container capacity. This expansion may give some shippers and the FMC cause for concern. The FMC formally requested additional information regarding the amendment on February 5, 2013, but on April 10, 2013 voted to take no further action to delay the effective date.

The TSA and the WTSA are separate discussion agreements whose members have limited antitrust immunity to discuss and set voluntary rate guidelines. Commissioner William P. Doyle noted “the expanded TSA will not have the authority to discuss and reach an agreement on restricting capacity in either the inbound or outbound directions.” Carrier members may only exchange and discuss capacity information; they cannot discuss capacity rationalization. Going forward, the Commission will continue to closely monitor the TSA.

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Cordero Replaces Lidinsky as FMC Chairman, Testifies to Congress Regarding 2013 Budget

President Barack Obama has designated Mario Cordero as the Chairman of the Federal Maritime Commission, replacing former Chairman Richard A. Lidinsky, Jr. Mario Cordero joined the Commission as a Commissioner on June 3, 2011, having been nominated by President Obama on September 17, 2010, and confirmed by the Senate on April 14, 2011.

The change of leadership for the Commission took place on Monday, April 1, 2013. Lidinsky will continue to work as an FMC commissioner until a replacement is appointed. “I am very pleased that the President will designate my colleague, Commissioner Mario Cordero of Long Beach, California, who joined the FMC in June 2011, as our next Chairman,” Lidinsky said, “and I look forward as a Commissioner to continue working with him on these goals and new challenges during the President’s second term.”

Since becoming Chairman in September 2009, Chairman Lidinsky has had three major administration goals for the FMC: “refocus” the Commission on giving a voice to American citizens, taxpayers and job creators during its deliberations; eliminate unnecessary rules and red tape regulations that were particularly harmful to small businesses; and promote “greening” in American ports to help both the environment and employment.

In one of his first acts as Chairman, Cordero testified to Congress regarding the FMC’s 2013 fiscal year budget. The President’s budget for the FMC provides US$ 25,000,000 for fiscal year 2014. This represents an increase of US$ 900,000 over the enacted fiscal year 2013 appropriation, and an increase of US$ 2,160,575 above the Commission’s post-sequestration funding level.

Cordero stated that he believes that the two most important ways the Commission can promote the economic recovery are: (1) working to ensure the competitiveness of the nation’s ports and maritime transportation system to make sure that it efficiently supports growing exports; and (2) providing maritime businesses regulatory relief so they and their customers can hire more American workers.

To accomplish these goals, the Commission’s Bureau of Enforcement, Area Representatives, and investigative staff continue to prevent and end shipping practices that are unfair or deceptive. Targeted violations have included illegal or unfiled agreements among ocean common carriers; unfair or fraudulent practices affecting household goods shippers; and misdescription of cargo, which not only affects shipment costs, but can also pose a serious safety and security risk by preventing vessel operators and port officials from knowing what goods are being transported on vessels into the United States. In FY2012, the Commission collected US$ 838,000 in civil penalties for Shipping Act violations.

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SMX, ILA Ratify New Six Year Master Contract

Members of the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) have recently negotiated and ratified a new six-year master contract.

The vote on April 17, 2013 by USMX’s forty-three members to ratify the contract ended thirteen months of negotiations with the ILA, which represents 14,500 workers at the East and Gulf Coast ports. ILA members voted on April 10, 2013 to ratify the master contract as well as a number of separate local agreements.

Contract renewal talks between the ILA and USMX initially deteriorated back in August 2012 over pay structures. This prompted the ILA’s largest Local, Local 1804-1, to authorize a union strike. The strike was narrowly averted when the USMX and the ILA agreed to a ninety-day contract extension in September 2012. This extension was set to expire on December 28, 2012, but with the assistance of the Federal Mediation and Conciliation Service (FMCS) the parties agreed to a second extension on December 27, 2012. On February 1, 2013, the parties reached a tentative agreement, which prevented any disruption of port operations.

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Transpacific Eastbound Carriers Postpone General Rate Increases to May 21, 2013

Carrier members of the Transpacific Stabilization Agreement (TSA), FMC Agreement No. 011223 serving the East Asia/USA trade lanes have announced postponements and reductions to General Rate Increases (GRIs) originally filed effective May 1, 2013. In recent FMC tariff filings, several carrier members have postponed their filed GRIs to May 21, 2013. GRI amounts have also been reduced to US$ 400 per 40ft container to the U.S. West Coast (USWC) and USWC local points, and US$ 600 per 40ft container to all other USA destinations. The group’s web site at www.tsacarriers.org provides additional information.

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