Oberstar Calls for Broad Ocean Shipping Reform

JOC Staff | Jun 11, 2010    The Journal of Commerce Online – News Story

House leader would end carrier antitrust immunity, impose new shipper protections

Decrying ocean container carrier business practices, the head of the House Transportation and Infrastructure Committee called Thursday for the end of antitrust immunity for vessel operators in the United States along with a wide range of new restrictions aimed at protecting shippers.

Rep. James L. Oberstar said carrier actions including rapid enactment of surcharges, bumping shipments from vessels and refusing to carry certain containers have caused widespread problems for retailers, costing them business as they try to recover from the recession and driving up costs for American consumers.

Oberstar’s strong statements at a shipping industry policy forum raised the possibility that Congress could undertake the most sweeping look at ocean transport regulation in more than a decade and impose new restraints on how carriers operate in the market and interact with their shipper customers.

“I think we should end the antitrust immunity that allows the carriers to talk to each other about rates, and if we replace that with full competition there will be a real marketplace that would see improvements in rates and service and delivery to consumers,” the Minnesota Democrat told the annual Washington Freight Transportation Policy Forum of the National Industrial Transportation League.

Oberstar did not say he has prepared legislation, and there’s likely little chance of drawing up and passing an ambitious new bill in the short period left before this fall’s elections. But his comments marked the strongest statement yet from a public official about controversies that have roiled the container shipping world since last year, from volatile swings in pricing to widespread reports of “rolled” containers in Asia and complaints from U.S. shippers of container shortages that are hurting export opportunities.

Pointing to comments from shippers at a recent hearing in Congress, Oberstar took aim at the broad state of the container shipping business since last year’s downturn and detailed specific areas he wants to address, including regulation of surcharges, limits on vessel sharing agreements, and deeper Federal Maritime Commission oversight of the basics of shipper-carrier contract relations.

That includes, he said, a bar against “the practice of bumping and rolling” containers, something shippers said has become especially prevalent in Asia as demand for space to Europe and the United States has far outstripped vessel capacity. Oberstar said new barriers could be modeled on the protections airline passengers have when they buy tickets.

“Aviation law prohibits airlines from engaging in deceptive practices and overbooking a flight without providing compensation. We need to protect shippers and consumers. We may have legislation to direct the (Federal Maritime Commission) to prohibit such deceptive practices,” he said.

He said he is particularly concerned with reports from some shippers that some carriers have refused to board containers not owned by the carrier. “e need network neutrality in ocean transportation,” he said.

And he criticized the carrier surcharges that have increased rapidly over the past year. “There are charges that are not necessarily based on costs,” he said. “We have to clarify that they have authority on such charges – do they provide notice in advance of increases, are there explanations of the charges? There has to be a process so shippers and consumers are not at a disadvantage.”

Oberstar says new regulation could include restrictions on the vessel sharing agreements that carriers have used to extend services while spreading risk. “The European Union restricts VSAs to 30 percent of the capacity in a single trade. That may be a reasonable place to begin,” he said.

“The ocean carriers sold the world on just-in-time,” he said. “It’s something they marketed and the shippers of the world believed them. And now the carriers have failed to live up to that promise.”

Congress has not broadly addressed ocean regulation since the Ocean Shipping Reform Act of 1998, which brought a new measure of deregulation to the industry following the Shipping Act of 1984.