FMC advises National Retail Federation on new ocean cargo alliances

In a speech given to the National Retail Federation’s
International Trade Advisory Committee and Strategic Supply Chain Council in New York City
 this week, the U.S. Federal Maritime Commission gave a brief overview of the current state of the containerized ocean cargo industry.

According to FMC Commissioner, William P. Doyle, such an effort is needed to bring shippers up to date on ocean carrier alliances, developments post-Hanjin bankruptcy, the proposed new ocean carrier company SM Line, digital ocean shipping concepts, and the recent petition filed with the Commission by the Coalition for Fair Port Practices.

Regarding ocean carrier alliances, Doyle notes that in theory there are four major alliances – that in short order will be reduced to three. Meanwhile, carriers will honor all contracts in place under the four alliances until April 1, 2017. The four major alliances are:

*2M Alliance comprises-
Maersk Line, and
Mediterranean Shipping Company (MSC)

*G6 Alliance comprises
APL Co. Pte Ltd.,
Hapag Lloyd,
Hyundai Merchant Marine (HMM) Co. Ltd., Mitsui OSK Lines (MOL) Ltd., Nippon Yusen Kaisha (NYK) Lines, and Orient Overseas Container Line (OOCL) Line.

*CKYHE Alliance comprises COSCO Container Lines Co., Ltd., Kawasaki Kisen Kaisha, Ltd. (K Line), Yang Ming Ltd.,
Hanjin Shipping Co, Ltd., and Evergreen Line

*Ocean 3 (O-3) Alliance comprises-
CMA CGM,
United Arab Shipping Corporation (UASC), and China Shipping Container Liner (CSCL)

Then, beginning on or about April 1, 2017, there will be three major ocean carrier alliances.

“This new generation of alliances have received worldwide regulatory approval. In the U.S. the alliances are permitted to begin operations,” says Doyle.

 The three alliances are:

*2M Alliance comprising-
Maersk Line (with Hamburg Süd), and Mediterranean Shipping Company (MSC)

*Ocean Alliance comprising-
CMA CGM (with APL),
China COSCO Shipping (merged company from COSCO and CSCL), Orient Overseas Container Line (OOCL) Line, and
Evergreen Line

*THE Alliance comprises Hapag Lloyd (with UASC)
Mitsui OSK Lines (MOL) Ltd., Nippon Yusen Kaisha (NYK) Lines, Kawasaki Kisen Kaisha, Ltd. (K Line), Yang Ming Ltd.

Then the container business units of each Japanese carrier (MOL, NYK, K-Line) will be merged into a single company by mid-2017).

“Shippers like you are concerned with ocean carrier alliances in the wake of Hanjin’s bankruptcy,” notes Doyle. “You should make every effort to secure the appropriate safeguards from the alliances.”

Doyle is urging logistics managers to work with carriers on ways to provide safeguards. This can be achieved any number of ways such as insurance contracts secured by an alliance, bonding or other financial instrument…but the most important point to consider is to get started now.

Apart from many elegant and theoretical explanations on what’s needed to restore ocean carrier service and profitability is one offered by Bob Barranco, Executive Vice President, Barr Freight System, Inc. – a Chicago-based freight forwarder.

In an interview with LM, he shared this observation:

“It seems almost incomprehensible that such large corporate entities with such wide global perspective could have permitted themselves to degenerate into a state of financial disarray…as many of them have.”