Shippers renew call for block exemption to be removed

The Global Shippers’ Forum has used the current disruption in supply chains to renew its call for the removal of the consortia block exemption regulation.

Chief executive James Hookham said that shippers were bearing the brunt of the broken supply chain.

“We are not happy is the bottom line,” he told a webinar following the release of the latest quarterly market review by the GSF and MDS Transmodal, which seeks to monitor the box shipping sector in order to inform regulators of its performance.

“Clearly we are the victim of circumstances in this terrible pandemic, but shippers have long been dissatisfied with the shipping industry’s apparent magical ability to co-operate in ways that would land any other business owner in jail.”

The real crunch point for shippers was that the service performance, the predictability of delivery of boxes so that shippers can collect boxes and get goods to consumers, had plummeted.

This was leaving a “very nasty taste in the mouth” for shippers who were paying record freight rates for a service that was increasingly declining in performance, Mr Hookham said.

“Supply has appeared to match demand a bit too closely and the co-ordination that is permitted by the block exemption has clearly allowed the lines to manage capacity such that pre-pandemic capacity was running slightly ahead of demand. It has now dropped behind.”

The demand for space was now exceeding what was available. While that may correct itself as demand eases, the broader picture was that if demand stayed high there was no short-term fix.

He warned that this could lead to inflationary pressures on recovering markets.

“If this is going to continue, not only will consumers see product shortages, but it will start to lead to higher prices.”

Shippers and exporters were feeling “frustration and anger”, particularly in Asia, at not being able to get reliable and predictable accommodation of their goods onto services, and then having to pick up the bills for demurrage and storage because goods cannot be shipped.

What frustrated shippers was the ability of lines to work as one entity, he said.

“The industry does not exhibit any great distinguishing features in the service it offers,” said Mr Hookham. “It is a commodity service and if it is a commodity, then the feeling is it should be regulated as a utility would be, a utility that provides a unique commercial and national interest provided by, effectively, one supplier.”

That would provide greater oversight, increased transparency and a restoration of confidence in the markets that rates and costs were the product of fair competition and not the construct of a “special privileged arrangement that, on the face of it, just appears to be enriching the shipping lines”.

He called for a system closer to that which regulates airline code-sharing agreements.

“Effectively, they are vessel-sharing agreements for the aviation industry, but they are able to do that through the development of specific agreements between the lines, which are regulated, reviewed and transparent,” he said. “It is understood what information is exchanged.

“Rather than give a blanket block exemption, we should actually get some visibility over what information is going to be shared and passed between them, and have that more regularly scrutinised.”

The current exemptions that were provided, not just by the European union  , but by jurisdictions all around the world were unprecedented, he added.

“There is a presumption in favour of renewing the block exemption — not just in Europe — but a number of jurisdictions have started to look hard at exactly why the shipping industry has behaved in the way it has.”