The shipping alliance proposed earlier this year, conveniently named THE Alliance, is raising the U.S. regulators’ eyebrows, as its strength might negatively impact local businesses.
According to William P. Doyle, a Commissioner with the U.S. Federal Maritime Commission, the joint contracting and purchasing power of the proposed alliance has raised “serious concerns.”
The alliance, to be forged by Hapag-Lloyd, K Line, MOL, NYK and Yang Ming shipping giant, was first revealed in May 2016.
Commissioner Doyle said that such alliances could hurt domestic businesses by using their collective power to jointly negotiate and jointly procure services from suppliers like tug operators, barge services, bunker fuel suppliers, chassis providers, container equipment lessors, feeder services and/or marine terminal and stevedoring services.
In early November THE Alliance members unveiled the planned services network which would see a fleet of more than 240 ships deployed on 31 services in the Asia/Europe, North Atlantic and Trans-Pacific trade lanes, including the Middle East and the Arabian Gulf/Red Sea starting from April 2017.
“I have expressed these concerns in person with the principals of THE Alliance, and I am confident that the parties will submit the appropriate substitute language to alleviate these concerns,” Doyle said.
He added that it “would not be fair to grant ocean carriers the ability to jointly contract and procure services while the domestic service providers cannot negotiate collectively,” which would bring THE Alliance into parity with the 2M and Ocean Alliance agreements.
Preventing another ‘Hanjin’?
While expressing concerns about the strength of the shipping alliances, Doyle also acknowledged THE Alliance’s efforts to make forward projections on ways in which to deal with a failed carrier or how the non-failing carriers can help the failed carrier’s shippers and other customers.
“It is noteworthy to point out that THE Alliance was filed in the wake of the Hanjin bankruptcy. Hanjin’s bankruptcy has disrupted the entire international maritime supply chain. I am an advocate (and have advocated) of the alliance members providing safeguards in the event of future liner bankruptcies,” Doyle said.
THE Alliance’s measures would include making arrangements directly with entities providing vessels/space as well as making arrangements with agents or subcontractors of the affected party.
Additionally, other actions would be made to facilitate the movement or cargo carried by the affected party and maintain continuity of operations and orderly movement of cargo.
“Though the details have not been completely worked out, the intent in part is to set-up a per se catastrophic instrument that could be used when an individual member liner fails in the network,” Doyle said, adding that, in theory, if a funding mechanism were to be set up, then funds could be used to pay operational expenses to bring ships into port and unload containers to ensure that cargo is not stranded on the water.
Furthermore, Doyle informed that some marine terminal operators and port authorities may want to explore options for entering into their own alliances where they could jointly negotiate terms and conditions with the ocean carriers.
Such an agreement was made in 2015, when the ports of Seattle and Tacoma began to synergize their activities under the umbrella of the Northwest Seaport Alliance, which covers activities including negotiating, setting and approving all terminal rates, charges, rules and regulations, and rates of return between the terminals.