Private Oceans

Private Oceans

Copyright 2004, Traffic World, Inc.

Confidentially speaking, it''s time for the Federal Maritime Administration to help move maritime transportation into the 21st century.

For more than a year now, the FMC has had before it petitions from six freight transport providers asking for the right to enter into confidential contracts with shippers for ocean services. The five are classified as nonvessel operating common carriers but they''re more commonly known by some of the most familiar brand names in the world, and among them manage the movement of billions of dollars worth of freight each day.

They include UPS, FedEx, DHL Danzas Air & Ocean, BAX Global, C.H. Robinson Worldwide and BDP International.

What these freight forces want is the ability they have in every other aspect of their business - the right to negotiate and enter into contracts with direct shippers that are strictly between them and the companies that own the freight.

It''s too simple, we believe, to argue that what they want is simply to have in place confidential contracts with their customers. The fact is, each of these companies operate on a global scale across a wide range of services, just as their customers are operating in an increasingly global world of international trade.

Transportation and trade are not what they were when the Shipping Act of 1984 was enacted, nor even what they were when the Ocean Shipping Reform Act was passed in 1998. That was when the current playing field was set, with liner companies deemed separate from NVOCCs and given rights on confidential contracting that were not granted to the forwarders.

It''s hardly a coincidence that four of the six petitioning companies had relatively little at stake in the maritime world of the late 1990s. Now, UPS, FedEx and BAX Global have added large logistics services to their core integrated carrier services in North America, and the others have moved their businesses into a more complex arena that includes management of freight services across the supply chain.

And where is the opposition?

Some liner companies are opposing the petitions, seeking to keep their own relationships with shippers in a kind of state of arrested development. It''s not hard to understand why: with their enormous investment in ever-larger capital assets, the liner companies face the risk of falling into a commodity trap if larger intermediaries with bigger buying power push their way onto those larger vessels.

But the World Shipping Council, whose members include those liner companies, may have broken the logjam with its recent notice that it supports the petitions of the NVOs. That reversed the WSC''s earlier objections to the petitions after the NVOs themselves, along with the National Industrial Transportation League, amended their requests to meet some of the liner companies'' objections. Some of this is based on legal fine points: "The restructuring of the requested relief to include an exemption from the requirement of tariff publication, coupled with a condition that requires service-contract-like filing requirements" fits the regulations, the WSC wrote.

But the WSC also noted that the latest request from shippers and the logistics companies "also provides certainty that all properly constituted and bonded NVOCCs would operate under a common set of rules."

That sets the stage for the FMC, when it next meets Oct. 27, to come down on the side of shippers, of international trade and, as we said just about a year ago, common sense.