Joseph Bonney, Senior Editor | Jun 29, 2012 10:43AM EDT
The Federal Maritime Commission’s proposal to create a container rate index for agricultural exports would violate the Ocean Shipping Reform Act’s confidentiality provisions and should be abandoned, the World Shipping Council said.
“OSRA clearly provides that, from a regulatory perspective, service contracts are to be confidential. Period. There was no role foreseen for the FMC to reveal in any way any aspect of a confidential contract relating to rates,” said the WSC, which represents container ship lines.
The council’s statement came in a strongly worded response to the commission’s request for comments on the index proposal.
FMC Chairman Richard Lidinsky Jr. floated the idea of a container rate index for agricultural exports based on a sampling of service contracts filed with the FMC. He said the index could reduce rate volatility.
The WSC said there is no evidence the index would reduce rate volatility, and that the government has not created a similar index for any other transportation mode. The index also would face practical obstacles and likely have unintended consequences, the WSC said.
“Quite aside from the fact that the shipping act forbids it, there is no valid basis or reason for the FMC to create a rate index with confidentially filed contracts for ocean common carriage,” the WSC said.
The council said the shipping act is intended to provide a regulatory framework for international common carriers, non-vessel-operating common carriers, forwarders, ports and shippers.
“Financial traders and derivative brokers are not within the proper realm of the agency’s regulatory interests, responsibilities, or competencies,” the WSC said. “There is no basis to believe that Congress intended that the FMC would intervene in the market to help financial traders create such a market for shipping futures.”
The WSC said the shipping act and FMC regulations “could not be clearer that service contract rate information filed with the commission is to remain confidential. The aim of the rate index proposal … is to make service contract rate information public. There is no way to reconcile the inconsistency.”
“Even if the commission had authority to undertake such an exercise, which is does not, there is no evidence or credible theory upon which to conclude that the proposed index would have any effect on the market forces that the proposal seeks to alter,” the WSC said. “Finally, the practical problems with the concept are many, and the probability of unintended negative consequences high.”
Contact Joseph Bonney at jbonney@joc.com. Follow him on Twitter @josephbonney.
