THE WEEK

THE WEEK

Supreme Court Won't Hear HMT Cases: The U.S. Supreme Court has let stand lower courts' decisions in two 2002 Harbor Maintenance Tax cases. The high court declined to hear appeals from Thomson Multimedia Inc. and CF Industries that challenged aspects of Harbor Maintenance Tax payments. In August 2002, the U.S. Court of International Trade ruled against Thomson Multimedia. The electronics importer argued that the Harbor Maintenance Tax collected on imports was unconstitutional because it was inseparable from the HMT on exports. In 1998 the Supreme Court ruled the HMT on exports to be unconstitutional. In November 2002, the Court of International Trade ruled against CF Industries, which said that imposition of the harbor tax on domestic shipments violated the port preference and uniformity clauses of the Constitution. Both rulings had been upheld by the U.S. Court of Appeals for the Federal Circuit.

NOL Favors Buybacks Over Acquisitions: Neptune Orient Lines would rather buy back its own stock than acquire rivals, given existing valuations, said its chief executive, David Lim. "The priority is to grow the business, but to grow it in a sensible way," Lim said in an interview with Bloomberg News. "I don't see anything out there that is price-attractive compared to my own shares." NOL had to issue at least two statements this year denying speculation that it would make an acquisition to expand its market share, after raising US$308 million last November. Under Lim's predecessor, Flemming Jacobs, NOL had considered buying P&O Nedlloyd Container Lines. NOL reported a $163 million first-quarter profit this month as rates and volume increased.

UP Won't Forecast End To Delays: Union Pacific Corp.'s chief executive told shippers last week that he could not predict when the railroad's problems with congestion might end. The logjams have been particularly acute in Southern California, the source or destination of one-quarter of UP's freight. Shippers say the lack of guidance by UP is hurting their ability to plan for the peak shipping season, amid fears the surge of shipments from Asia will overwhelm the bottlenecked carrier. Union Pacific this month canceled a transcontinental contract with UPS after shifting some UPS loads to trucks. The railroad also turned away business and raised some rates to ease congestion.

New Ships Will Pressure Rates: U.S. importers of European products can expect higher rates through 2005, but a surge in vessel capacity will give importers the upper hand in rate negotiations later in the decade, said consultant Brian Clancy, principal of MergeGlobal Inc. Speaking at The Journal of Commerce's Trans-Atlantic Maritime Conference in Short Hills, N.J., Clancy said carriers should "make your money now in 2004 and 2005 because a capacity tsunami is coming." He projected that in 2006 and beyond, vessel capacity in the trans-Atlantic will increase by 5.2 percent a year while cargo volume rises only 4.2 percent annually. Ben Hackett, managing director of international consulting at Global Insight Inc., said Europe's gross domestic product is expected to grow only 1.6 percent this year and 2.5 percent in 2005, compared with rates of 4.2 percent and 3.4 percent, respectively, for the U.S. Hackett noted that the addition of 10 Eastern European nations to the European Union will have limited impact on trans-Atlantic trade, because most European trade is within the continent.

FMC Ruling On NVOs Not Imminent: The Federal Maritime Commission is likely to offer some indication by year-end on whether it will allow non-vessel-operating common carriers to sign confidential rate agreements with shippers, said Karyn Booth, partner at Washington-based law firm of Thompson Hine. "But the issue won't be resolved, and the decision will be years away," she told the Trans-Atlantic Maritime Conference. Ashley Craig of the Thompson Coburn law firm told the conference that if the FMC decides against granting NVOs an exemption to permit confidential contracts with shippers or delays a decision, integrated logistics providers such as FedEx and UPS are likely to seek relief from Congress. "It will be interesting to see the struggle in Congress between FedEx and UPS, on the one hand, that have a lot of clout in legislators' districts, and carriers like Maersk Sealand on the other, which don't have post-Panamax vessels sailing through those districts," Craig said.

Carriers' Service Called 'Unacceptable': The weakening of conferences has provided shippers with more choices but has complicated the job of negotiating contracts, shippers said at The Journal of Commerce's Trans-Atlantic Maritime Conference. Mary Newman, logistics director at food-products importer Sensus America LLC, expressed nostalgia for the days before the Ocean Shipping Reform Act of 1998, when the Trans-Atlantic Conference Agreement set rates for most carriers in the trade. "We're not getting the service we used to," Newman said. Joseph Saggese, executive managing director of the North Atlantic Alliance Association, a shippers association, acknowledged that although shippers had little flexibility in service contracting under TACA, rates were locked in for a year or two and shippers could accurately forecast their transportation costs. Because carriers did not compete on rates, there was more differentiation on service quality, he said.

OOCL Logistics Reorganizes: Orient Overseas Container Line will reorganize its OOCL Logistics unit and move the unit's headquarters back to Hong Kong, where OOCL is based. Allan T.S. Wong, a member of OOCL's executive committee, has been named chief executive of OOCL Logistics, and John Firman has been named vice chairman. They will oversee the restructuring of OOCL Logistics into three business units that will focus on international logistics, China logistics and e-business.