News / Shippers should be 'careful what they wish for' on block exemption regulations

Nederland, Rotterdam, 2008 Op de ECT terminal op de Maasvlakte worden containers door containerkranen en werknemers op en overgeslagen Foto; Freek van Arkel/Havenbedrijf Rotterdam

Shippers should think twice about lobbying the EU to lift the block exemption regulation (BER) for liner shipping, it was claimed yesterday.

Wading into the recent war of words between shippers and carriers, speakers at the TOC Asia Container Supply Chain conference in Singapore suggested removing the BER would yield no benefit to cargo owners.

“There was a lot of heated discussions at the recent OECD meeting in Paris,” revealed Sea-Intelligence chief executive Alan Murphy.

“All the stakeholders are pissed off with the shipping lines on everything – reliability, blank sailings and how they cooperate in alliances.

“Now the EC has given those stakeholders a club to beat the shipping lines with – that the BER should be lifted.

“But I don’t think they actually want that; I think that would result in a poorer situation for most of the shippers.”

The BER, which is the de facto legislation covering liner alliances and vessel sharing agreements (VSAs) on container trades to and from Europe, is set to expire on 25 April next year.

Mr Murphy said alliances and VSAs had led to attractive cost savings for carriers, “which they’ve obviously not retained because they haven’t made any money – they’ve passed the savings on to the shippers and the consequences have been lower freight rates”.

Furthermore, he noted, if the EC does remove the BER, then VSAs would not become illegal, but rather more difficult and costly to implement, due to additional reporting requirements. As a result, larger carriers would likely continue with VSAs while smaller players would find it more difficult.

Thomas Elling, Hapag-Lloyd’s head of sales and customer service, agreed that lifting the BER would not affect carriers’ ability to share vessels or space.

“That will certainly continue, in any case,” he said. “I also don’t necessarily see any per se break-up of the different alliances as you see them today; that scenario might change if there’s another acquisition or merger, but at this point in time that’s also not so likely.”

Alphaliner chief analyst Tan Hua Joo warned shippers should be “careful what they wish for”.

“It is unclear on the part of the regulators, as well as the shippers right now, exactly what is the outcome they desire,” he said, claiming alliances were “the single largest driver of the very low freight rates in the market”.

He added: “If you do remove this as a tool for the shipping lines, are you prepared to accept higher freight rates as a consequence? This is the most likely result of taking away this exemption.”

Jeremy Nixon, chief executive of Ocean Network Express (ONE), told The Loadstar: “I think it’s in the interests of trade, in the interest of the industry both on the shipper side and the carrier side, that consortia continue to operate, because that provides efficient slot costs, the best frequency and widest range of coverage.

“The economists are largely in consensus on that and I understand the EU now is reviewing probably not the removal of the block exemption, but possibly some alteration in the protocols or regulations, and we just have to wait for that.”