The Federal Maritime Commission (FMC) recently published an updated list of controlled carriers. Controlled carriers are ocean common carriers operating in U.S. foreign trades that are owned or controlled by foreign governments. The Commission’s updated list reflects one new addition and four removals. Hainan P O Shipping Co., Ltd. was classified as a controlled carrier on July 23, 2010 and is the newest addition to the controlled carrier list. Four other common carriers were removed from the controlled carrier list due to inactivity: Ceylon Shipping Corporation; Compagnie Nationale Algerienne de Navigation; Sinotrans Container Lines Co., Ltd. (d/b/a Sinolines); and The Shipping Corporation of India Ltd. The FMC’s complete controlled carrier list includes (1) American President Lines, Ltd and APL Co., Pte. – Republic of Singapore; (2) COSCO Container Lines Company, Limited – People’s Republic of China; (3) China Shipping Container Lines Co., Ltd and China Shipping Container Lines (Hong Kong) Co., Limited – People’s Republic of China; and (4) Hainan P O Shipping Co., Ltd. – People’s Republic of China. Since the list’s release, however, P O Shipping has expired its FMC tariffs effective November 29, 2012 and is expected to discontinue its service to the U.S.
This controlled carrier list is not a comprehensive list of foreign-owned or foreign-controlled ships or ship owners; rather, it is only a list of ocean common carriers registered with the FMC that are controlled by governments. Such carriers are subject to special regulatory oversight by the Commission under the Shipping Act of 1984. The Shipping Act of 1984 (46 U.S.C. § 40102(8)) defines a “controlled carrier” as: an ocean common carrier that is, or whose operating assets are, directly or indirectly, owned or controlled by a government, with ownership or control by a government being deemed to exist for a carrier if – (A) a majority of the interest in the carrier is owned or controlled in any manner by that government, an agency of that government, or a public or private person controlled by that government; or (B) that government has the right to appoint or disapprove the appointment of a majority of the directors, the chief operating officer, or the chief executive officer of the carrier. Congress tasked FMC with the oversight of controlled carriers to ensure that controlled carries, whose marketplace decision-making can be influenced by foreign governmental priorities or by their access to non-market sources of capital, do not engage in unreasonable below market pricing practices which could disrupt trade or harm privately-owned shipping companies serving the U.S. trades.
The Federal Maritime Commission (FMC) recently released a final ruling to update its Rules of Practice and Procedure for pleadings, motions, and discovery in agency adjudications. The FMC’s revised rules are intended to update and clarify their rules and to reduce the burden on parties with proceedings before the Commission. The Commission also amended the regulation for filing of documents containing confidential materials.
Of significance among the updated rules is a revision to Rule 63 aimed at speeding up proceedings initiated by the FMC’s Buerau of Enforcement (BOE). Under current procedure, the FMC institutes an enforcement action by issuing an Order of Investigation and Hearing that advises an entity of the issues under investigation. There is no requirement in the current procedural rules that the entity answer or otherwise respond to the Order. If an entity fails to respond to an Order of Investigation, the FMC’s enforcement action may be delayed for several months. Under the revised rule, the Order of Investigation and Hearing will require entities to submit a detailed answer within 25 days. The Order of Investigation will also clearly identify consequences for failure to answer or otherwise respond to the Order.
The Commission’s revised Rules of Practice and Procedure go into effect November 12, 2012. A complete list of the updated rules is located at http://www.fmc.gov/assets/1/Documents/11-05-Final%20Rule.pdf.
Carrier members of the Transpacific Stabilization Agreement (TSA), FMC Agreement No. 011223 serving the East Asia/USA trade lane have announced General Rate Increases (GRIs) effective December 1, 2012.
Several carriers have announced a GRI of US$ 400 per 40-foot container (FEU) to the U.S. West Coast and US$ 600 per FEU via all-water to the U.S. East and Gulf Coasts, as well as intermodal shipments. This GRI is part of the TSA’s guideline rate and ancillary charge adjustments that they intend to apply to all new and renewed service contracts from mid-October forward. These carrier initiatives aim to reverse 2011 and 2012 losses and raise the baseline for freight rates as they head into a new round of 2013-14 contract negotiations.
The TSA’s New Formula Bunker Adjustment Factor (BAF) for the October to December 2012 quarter, with adjustment for slow steaming, is US$ 527 per 40ft container (FEU) to U.S. West Coast Ports and US$ 1020 per FEU to U.S. East and Gulf Coast Ports, with other sizes as per the formula. The Inland Fuel Surcharge (IFS) for the October to December 2012 quarter is US$ 348 per container for shipments to IPI destinations served via West Coast Ports, US$ 174 per container for shipments to RIPI destinations, and US$ 101 per container for shipments to Group 4 Points and to East Coast local store door points. The Currency Adjustment Factor (CAF) for the same period is 22 percent for shipments from Japan.
The TSA’s 15 carrier members are: American President Lines, CSCL, CMA-CGM, COSCO Container Lines, Evergreen Marine, Hanjin Shipping, Hapag-Lloyd Container Line, Hyundai Merchant Marine, “K” Line, Maersk Line, Mediterranean Shipping, NYK Line, OOCL, Yang Ming Marine and Zim Integrated Shipping Services. The group’s web site at www.tsacarriers.org provides additional information.
Several global ocean carriers have announced General Rate Increases (GRIs) to all reefer container base rates effective January 1, 2013. Most carriers have announced this GRI applicable to worldwide containerized cargo. According to carrier announcements, these increases are aimed to provide the returns needed to further invest in the infrastructure related to reefer container service. Many carriers have announced a worldwide GRI of US$ 1500 per reefer container, applicable on all container sizes.
Many carriers note that current rates for reefer container shipments do not adequately cover increasing operating costs. CMA CGM reports that offering reefer container services is costing 70% more than an equivalent dry shipment. Maersk Line announced that “refrigerated containers are almost four times as costly to build as dry containers and associated expenses such as plug, bunker cost and R&D (research and development) put pressure on costs.” Maersk Line also announced that they will not invest in additional reefer containers in 2013. Mediterranean Shipping Company notes that a GRI is necessary in order to “safeguard further investment” in the reefer container sector and “to provide a high standard of service to the Reefer Trade.”
Reefer container transport accounts for a significant percentage of total volume for many carriers. CMA CGM reports that 7% of their total volume (dry and reefer cargo) is moved in reefer containers, and that this number is in constant growth in order to meet the demand requirements of their customers. The carrier also notes that a single reefer container results in an investment of about US$ 18,000 per container.
These rate increases may prompt some shippers to reconsider conventional reefer carriers. Over the last few years many cargoes traditionally handled by conventional reefer carriers have shifted to refrigerated containers due to lower freight rates offered by container carriers. With the addition of these GRIs these cost advantages will be greatly reduced.
The GRI on reefer containers will be used by many carriers to invest in additional container vessels with sufficient plugs, more sophisticated reefer containers, as well as additional personnel with a high level of expertise in reefer container use and maintenance. For more information, please visit the individual carrier tariffs, or contact your ocean carrier representative.