THE LINES ARE DRAWN

THE LINES ARE DRAWN

he hearing promised by Rep. Henry Hyde, R-Ill., into a key component of ocean shipping reform is still five weeks away, but the battle lines are clearly drawn.

To be more precise, the lines have been drawn since before the Ocean Shipping Reform Act of 1998 emerged from Congress. Nine months of experience living under the landmark law's provisions don't seem to have softened them or drawn them much closer together. If anything, they're getting more distinct as time goes on.That promises an interesting hearing on March 22 before Hyde's House Judiciary Committee. And it signals a protracted scrap, both at home and abroad; the Hyde hearing is only the first step on Capitol Hill, and meanwhile the Organization for Economic Cooperation and Development, the industrialized world's think tank, will take up the same basic issue in May at a work session in Paris.

But as the debate continues, no one should lose sight of something else that's clear: The reform act has changed the shipping market, and largely for the better, by opening the doors to competition. And it continues to do so.

The immediate issue is antitrust immunity for ocean carriers. It was granted by Congress in the Shipping Act of 1916 to put American shipping lines on an even keel with their foreign competitors, which since 1875 had banded together in conferences to set rates on the trade lanes they served. The idea, then as now, was to prevent ruinous price wars, ensuring shippers stable service and helping protect carriers' huge investment in their equipment.

Carriers have jealously guarded their immunity but, at least in recent years, they have usually been unable to get much out of it. Their rates, overall, have actually dropped since the mid-1980s as they have competed fiercely and brought more and more ships into the market. Even so, shippers instinctively detest the very idea of their suppliers being able to fix prices.

Antitrust immunity, however, is the linchpin of the Ocean Shipping Reform Act. It was the price carriers demanded for the united support that pushed the measure through Congress. And it was a price shippers - at least major shippers - were willing to pay.

The result, OSRA, didn't completely do away with shipping regulation. But it took a giant step toward it by allowing shippers and carriers to negotiate individual service contracts between one another and keep the rates and other significant terms confidential, as businesses do in most other industries. That undercut rate-setting conferences. However, carriers also can meet in discussion groups and promulgate voluntary rate and service guidelines.

The law took effect last May 1. Shippers and carriers responded tentatively at first, stepping gingerly in new territory. Then the pace quickened. It hasn't been a smooth and simple process - but the free market doesn't work that way in any case.

Some key statistics tell much of the story. Between May 1 and the end of the year, 84,643 service contracts - more than 25,500 of them original contracts - were filed with the Federal Maritime Commission, an increase of 142 percent over the same period of 1998. Meanwhile, the number of active conference agreements on file at the FMC dropped to 22 from 33, and no new conferences have been established.

Shippers and carriers have begun embracing the freedom to address their specific needs in individual contracts. ''The contract today really is a blank sheet of paper'' is how a forwarder described it. ''Let your imagination go,'' a carrier added. And both sides expect the evolution to continue.

In short, carriers and many shippers, especially bigger shippers, are taking advantage of the provisions of OSRA and putting them to good use.

Not everyone is happy, however. The sectors of the industry that had deep reservations about OSRA before it was passed still view it negatively. That includes small shippers, who lack the cargo volume to swing much weight with carriers. And it especially includes non-vessel-operating common carriers, which handle the cargo of smaller shippers.

The NVOs aren't allowed to offer confidential contracts to their customers, as vessel-operating carriers are. That's the result of another compromise, this one aimed at ensuring the support of longshore labor, which says it lost jobs because of NVOs, and carriers, which have traditionally had an uneasy relationship with NVOs.

So NVOs operate under a handicap. They're unhappy about their situation, and they and other intermediaries fear that ocean carriers' antitrust immunity puts them at risk of even greater discrimination. NVOs have focused on that controversial issue. They've found a champion in Hyde, whose district includes a large concentration of them, and who is pushing legislation to take away ocean carriers' immunity.

The March 22 hearing will focus on that bill, although a range of issues is likely to come up in addition to antitrust immunity. That's going to include the fact that most carriers today are now foreign-owned, a visceral issue and one that undercuts the original reason for immunity.

The OECD session on immunity two months later is part of an international trend toward deregulation. Neither effort will be a short-term affair.

As a matter of general policy, it never hurts to examine and thoroughly air an issue. Certainly OSRA does not treat all parties equally, and certainly it did not go all the way to full deregulation.

But if OSRA didn't go far enough, it still has gone far. It is making a positive impact. It is injecting much-needed competition into the shipping marketplace; the market is becoming the force that sets prices, not the steamship conferences. OSRA is promoting more productive and cost-effective ocean transportation.

And that can't be forgotten as things proceed in Washington and Paris.