US Commissioner Calls for Carrier Alliance Safeguards

 03 Mar 2017     Carriers, Global Economy/Trade, Politics, Ports, Security and Logistics, Shipping

US Federal Maritime Commissioner William Doyle wants carrier alliances to “work in the direction of providing safeguards” to ensure cargo is delivered in the case of another bankruptcy like Hanjin Shipping.

Addressing an audience at the 2017 TPM Conference, Doyle said things could have been "done differently" after Hanjin presented bankruptcy “warning signs”, but criticised the South Korean government for pulling its support funding and allowing the world’s seventh largest carrier to go bust, adding that South Korean officials should have provided more notice ahead of the collapse.

Doyle commented: “Shippers and carriers need to work in the direction of providing safeguards. It is so important that this does not happen again.

“Companies may fail, but the responsibility lies with everyone, at least to the extent that we do not have the damage that occurred post Hanjin.”

The August 2016 collapse of Hanjin Line was a wake-up call for the entire ocean transportation supply chain as more than US$14 Billion in cargo was stranded at sea and ships were scattered all over the globe at anchor or just outside territorial waters.

The Hanjin bankruptcy saw ports without answers as to how to solve the situation, as stranded truckers waited to pick up containers and return equipment and exporters were unable to move goods out of terminals to rebook onto other ships.

Infographic: Hanjin in Numbers

Doyle said that these, and other impacts, cost the US supply chain “tens-of-millions of dollars” in additional losses to land-side operations.

He called upon World Trade to “find a way to speak with one voice on the importance of the entire industry”.

Doyle added: “Things need to be done differently moving forward. We need safeguards. Upcoming new alliances should be jointly responsible for their partner lines.

“You get limited antitrust immunity to form alliances and you need to make sure the shipping public is treated fairly.

“I firmly believe that if you are going to join an alliance it is the responsibility of the alliance members to ensure the cargo gets where it needs to go."

Doyle voted in favor of requesting additional information from "The Ocean Alliance" parties, led by carrier line CMA-CGM, in August 2016. 

He called for "fair dealing and transparency" in how the parties handle negotiations with third parties, suppliers, small businesses, and other service providers, warning that using their proposed buying power through proposed joint purchasing agreements could harm both downstream and upstream participants.

An existing 2M Alliance Agreement provides safeguards for US third-parties, including small businesses, such as marine terminal operators, stevedores, tug operators and other providers or suppliers.

Doyle added: “If a carrier company fails and that carrier is party to an alliance, the cargo carried on the failed company’s ships may only equate to one-third of the container volume carried.

“The other two-thirds of containers may belong to The Federal Maritime Commission is responsible for regulating the Nation’s international ocean transportation for the benefit of exporters, importers, and the American consumer.

“The Commission’s mission is to foster a fair, efficient, and reliable international ocean transportation system while protecting the public from unfair and deceptive practices. other carriers in the alliance. So, it is essential that you all take responsibility.”

Analysis surfaced recently that suggests Hanjin’s unsecured creditors, including banks, bondholders and trade debtors will recover close to zero of their outstanding claims.