FMC to Address Chinese Shipping Policies

By Staff -- Logistics Management, 8/1/1999

After a yearlong investigation, the U.S. Federal Maritime Commission (FMC) has concluded that Chinese shipping practices place U.S. competitors at a significant commercial disadvantage. The commission therefore has instructed its legal staff to prepare possible sanctions against Chinese shipping companies doing business in the United States. Those sanctions could include fines of up to $1.1 million per voyage, limitations on vessel calls at U.S. ports, suspension of regulated agreements, and other similar measures.

The investigation was launched last August when the FMC received reports that China was unfairly restricting U.S. carriers' business activities in that country. The FMC found numerous examples of institutionalized discrimination. For example, U.S.-owned carriers may only open wholly owned offices in ports where their vessels make direct calls. U.S. carriers that want to book freight, issue bills of lading, or conduct other business at inland ports or ports served by transshipment must have Chinese agents affiliated with state-owned carriers conduct those activities on their behalf. U.S.-owned carriers also are prohibited from carrying out many port-related services themselves, including arranging berthing, loading and unloading, customs entry and clearance, transshipment, and multimodal transportation. Again, U.S. companies must hire state-owned agencies affiliated with their Chinese competitors to handle those functions.

Particularly controversial is the Chinese government's plan to require disclosure of essential terms of confidential service contracts, a move that would negate one of the most important provisions of the Ocean Shipping Reform Act of 1998 (OSRA). That move appears to be in retaliation for OSRA's requirement that state-owned shipping lines change rates on 30 days' notice, which affects COSCO Line, China's largest ocean carrier. COSCO has protested that restriction to the FMC.

FMC Chairman Harold Creel, in announcing the decision to develop sanctions, emphasized that Chinese carriers operating in the United States did not face the same restrictions that their government placed on U.S. carriers. Creel also said he found it disturbing that U.S. carriers were forced to hire their competitors' affiliates to perform daily commercial functions. "This necessarily gives control of their costs, service quality, brands, and sensitive commercial information to the Chinese companies," he said. The current situation must change, he added. "If not, I believe it may be necessary to begin limiting the scope of Chinese carriers' operations in the United States to ensure that they do not obtain a permanent, unfair advantage."