FMC Orders Increased Oversight of Vessel Alliances

The Federal Maritime Commission is ordering three global vessel alliances to provide more timely reports on changes in vessel capacity in the U.S. trades.

The Grand Alliance, New World Alliance and CKYH Alliance will report changes in overall capacity monthly, rather than quarterly. The order takes effect Jan. 24.

According to the FMC order issued Tuesday, a shortage of vessel capacity a year ago led to a nine-month investigation of the causes. The investigation led to an FMC order last September that the Transpacific and Westbound Transpacific discussion agreements must provide verbatim records of all meetings.

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The commission said that quarterly capacity reports were not sufficient to allow FMC monitoring. By the time the FMC receives the data, they could be more than five months out of date.

“Global alliances, while potentially efficiency enhancing, also have the potential to be complex and anticompetitive operational agreements,” the FMC said. It said a shortage of space in a trade lane could lead to an unreasonable decrease in service and upward pressure on rates.

The new order requires that the alliances file minutes of meetings of “the senior-most committee that approves capacity and schedule planning recommendations” in addition to the monthly capacity reports.

Alliances also will be required to provide advance notice of planned increase or decrease in capacity. Carriers also will file notice of vessel substitutions or changes in sailing schedules that cause a change of 5 percent or more in capacity in a certain trade lane.

Hapag Lloyd, Nippon Yusen Kaisha (NYK), and Orient Overseas Container Line are members of the Grand Alliance.

The New World Alliance comprises APL, Hyundai Merchant Marine, and Mitsui O.S.K Lines.

The CKYH is made up of Cosco Container Lines, Kawasaki Kisen Kaisha (“K” Line), Yangming and Hanjin.

-- Contact R.G. Edmonson at bedmonson@joc.com.