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1 1 (June 5, 2017)

handle is hein.crs/govcfxv0001 and id is 1 raw text is: FF.ri E.$~ & June 5, 2017 The Container Shipping Slump, U.S. Exports, and the Role of the Federal Maritime Commission The international container shipping market is currently undergoing significant consolidation in response to slower growth in world container trade. This development may be problematic for some U.S. exporters and for the smooth functioning of ports. Congress is considering legislation that could lead to greater competition among container ship lines. ,-c : kg ,,cau , d Container shipping, also known as liner shipping, carries most U.S. international trade and a growing proportion of agricultural trade. The international container shipping market, for decades, has had a persistent problem with oversupply of shipping capacity. Maritime trading nations generally have sought to develop and support their own fleets of ships for national and economic security reasons and/or to signify their nations' development and global presence. More recently, overcapacity has been exacerbated by larger ships that have come into service at a time when trade growth has slowed (Figure 1). Since the 1800s, ship lines have formed cartels, known as conferences, to regulate rates and capacity on international routes. The United States and other countries have given ship owners a certain amount of antitrust immunity to participate in conferences, but have also set strict limits on the way conferences function. Although the United States has generally favored competition among transportation carriers in recent years, allowing regulated antitrust immunity for ocean carriers recognizes the global nature of shipping and thus the difficulty of pursuing U.S. policy preferences unilaterally. Agreements among carriers are regulated by the Federal Maritime Commission (FMC), an independent agency. The FMC has five commissioners appointed by the President and confirmed by the Senate for five-year terms, with no more than three from the same political party. Congress began limiting cooperation among ship lines in 1916. Since the 1980s, various deregulatory shipping acts have reduced the market power of shipping alliances. Tariffs (official ocean rates) are no longer required to be filed with the FMC, but rather merely posted on a carrier's website, and ship lines are free to carry cargo at less than the conference rate or not to belong to a conference. The vast majority of containerized cargo is carried at contracted rates specified in confidential agreements between carriers and importers and exporters (shippers) rather than at the posted rates. In 2008, the European Union disallowed agreements among carriers involving specific rates and capacity quotas (called rate discussion agreements, or RDAs), but continued to allow more general vessel- sharing agreements (VSAs), under which carriers reserve space on each other's vessels. Thus, only VSAs are now allowed among liner carriers providing service between Europe and North America. Figure I. U.S. International Container Trade Loaded 20-Foot Equivalent Units (TEUs) K 2. . . .. . . . 2 Source: Maritime Administration, U.S. Waterborne Foreign Trade. While the general trend has been toward further deregulation of the market, the United States and Asian nations still allow RDAs among liner carriers. The most prominent RDA involving U.S. trade is the Transpacific Stabilization Agreement among 10 container carriers. RDAs must be nonbinding, so that each ship line is making only a voluntary commitment to abide by the pricing terms in the agreement. A carrier may ignore an agreement if it is in its interest to reach other rate and service terms with a shipper. The nonbinding nature of the agreements is a key feature that has limited the carrier alliances' ability to influence the market. VSAs or similar agreements about vessel space sharing, rather than RDAs that also set common rates, cover most liner trade to and from the United States. All such agreements must be filed with the FMC, which solicits public comment. A proposed agreement goes into effect in 45 days unless the FMC requests more information or opposes it in federal district court. Shippers, in general, strongly oppose RDAs, but have been less concerned about VSAs. A bill approved by the House Transportation and Infrastructure Committee on May 24, 2017, H.R. 2593, would disallow carriers from participating in both an RDA and VSA. The proposed change appears to reflect concern over recent consolidation activity among liner carriers. A companion bill approved by the Senate Commerce Committee, S. 1129, does not make this change. Since the Great Recession in 2008 and 2009, the growth rate of U.S. container trade has slowed (Figure 1). The slowdown may have caused the bankruptcy of two major .O 'T p\w -- , gnom goo mppm qq\ a , q 'S I 11LIANJILiN,

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