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Issue 5 2014 - Freight Business Journal China scuppers P3 deal

Maersk, CMA CGM and MSC announced in mid-June that they had abandoned plans to set up a global P3 alliance. It followed a shock announcement by China’s ministry of commerce (MOFCOM) that it would not sanction the deal, on 17 June. Beijing had been widely expected to follow the US Federal Maritime Commission and European Commission’s earlier lead in sanctioning the move. However, it appears that Chinese

concern over the P3 alliance’s market share on the Asia/Europe and Asia/US trades has prevailed. In a statement, MOFCOM said that it remained unconvinced that the P3 alliance’s members, whom are already leading container carriers, should be allowed to further increase their market share by coming together. It said: “The ministry of

commerce does not object to enterprises using their


resources to achieve competitive standings in the market. But for these already powerful enterprises

to further their market dominance by entering into alliances, there will be a need to seriously analyse the impact on competition. “The combined capacity of the

three P3 members would give them a 47% market share in the main Asia-Europe container shipping trade,” it added. Prior

to the Chinese

announcement, the prevailing view in the industry was that with China’s own container lines having relatively small market shares on major trades, China itself had little hope of emulating the P3 lines’ market share in the near term. The new alliance would have the merit of boosting service frequencies on its main trading lanes, albeit with services operated by foreign- owned lines. However, the Chinese government appears to have taken a different view. The shipping lines themselves

moved swiſtly to announce that the P3 deal was off, putting out press statements before many people were even aware of the MOFCOM

announcement. Nor did they give any hint of any attempt to change the Chinese authorities’ minds. CMA CGM said: “The P3 partners

take note of and respect MOFCOM’s decision.” Maersk Line, MSC and CMA CGM have agreed to end P3 implementation, it added. Speaking before the M2 deal

with NSC had been announced, Maersk Line’s chief trade and marketing officer, Vincent Clerc, declared: “In Maersk Line we have worked hard to address the Chinese questions and concerns. So of course it is a disappointment. P3 would have provided Maersk Line with a more efficient network and our customers with a better product.” Maersk’s group CEO Nils

Andersen commented: “The decision does come as a surprise to us, of course, as the partners have worked hard to address all the regulators’ concerns. The P3 alliance would have enabled Maersk Line to make further reductions in cost and CO2

emissions and not least improve its services to its customers with a more efficient vessel network. Nevertheless, I’m quite confident Maersk Line will accomplish those improvements anyway. It has delivered on those improvements over the last five quarters in the absence of P3 and I’m confident it will continue to do so.” MSC added: “We are

disappointed by the decision of MOFCOM but will continue our efforts to operate more efficiently and provide our clients with a comprehensive and excellent service” said vice president, Diego Aponte. He said: “We could have

achieved these efficiencies much faster through P3 but with our investment in more fuel efficient vessels, further economies of scale will still be achieved over a period of time.” South Korean sanction for P3

was also being awaited, but with the P3 deal dead in the water, this is largely academic.

Cargo decs set to go electronic soon, says Brussels

The European Commission says it will “very shortly” present a proposal on the electronic manifest for cargo declarations as part of a package of measures to cut red tape for ship operators in the EU. According to a report adopted on 25 June, the text of

Directive reporting formalities

2010/65/EU for

on ships

arriving in and/or departing from ports of the member states should be tabled before the summer and could go into operation around June next year. The Commission has also

announced an ‘e-Freight’ initiative to reduce the amount of paperwork for all modes of transport, allowing operators to integrate customs-related data coming from different sources. One of the main objectives

of Directive 2010/65 is to set up single window reporting. So far, efforts to achieve this have run into problems because of different technical standards in member states and the difficulty of

developing a common

interface. The Commission says it is working on guidelines and technical specifications to avoid this in future. Many

ports have created

strong community systems, linking shipping lines, forwarders, shippers, shed operators, customs and other governmental bodies, but they are nationally-focussed and do not link to other port systems. Individual companies have to be able to communicate with each port system separately. An e-Manifest for use across Europe would help, although it

may not be recognised by non- European authorities, some of which still insist on paper documents. No one yet knows how the

single window, also known as the Union Customs Code, will work, but it is not likely to be implemented until at least 1 May 2016. One benefit is meant to be the ability for forwarders to submit customs entries for all of their European traffic from one office - but most forwarders think that is unlikely to increase efficiency or cut costs because their customers will still want to have local contacts dealing with their consignments. Seafreight lags behind

airfreight in the use of e-freight, partly because airfreight has a global industry champion,

IATA, to push new standards and procedures

forward. The

Netherlands’ NLIP project, which aims to improve the use of technology within all transport modes, has support from the Dutch government, Customs and other regulatory bodies. But the EU appears

to move at a much

slower pace, perhaps because it has to deal with so many different organisations, many of which have their own agendas. In the move towards electronic

communications, airfreight also has the advantage in that all space booking is done by forwarders, whereas seafreight shippers can deal direct with the liner company if they prefer.

(See Freight Soſtware Guide, page 18)



Shippers’ groups, which had earlier voiced misgivings about P3 but had then been assuaged by promises of various safeguards, again appeared to welcome the shipping lines’ U-turn. Predictably, perhaps, the Hong Kong Shippers’ Council was the most positive. In a statement published the day aſter the MOFCOM announcement, it said it welcomed the move, arguing that, with 90% of exports under FOB terms, the choice of carrier from its territory was in the hands of overseas buyers. “Consequently, shipping lines aſter they come to terms on sea freight rates with overseas buyers, implemented numerous local charges and surcharges on Hong Kong shippers in order to increase revenue” - many of which were “hardly justifiable”, and eroded Hong Kong’s competitiveness, it said. The European Shippers’ Council said that it understood the Chinese decision as it had already expressed its concern about the risk of an alliance with a 44% share of the market between China and Europe. This danger had also been evoked by the US Federal Maritime Committee which had given the green light given to P3 only on strict conditions of control. The UK-headquartered Global Shippers’ Forum added that legal uncertainties had played a part in the lines’ decision to abandon P3. GSF secretary general Chris Welsh said: “The unprecedented size and scale that the proposed P3 Global Alliance was going to pose competition regulators was a concern. We had welcomed the recent monitoring arrangements for the proposals, but the P3 appears to have failed the legal hurdles under Chinese competition law which we always recognised was likely to be both an unknown factor and problematic.” Earlier that month, the P3 Network alliance, which had already got the green light from the Federal Maritime Commission in the US in March, passed another important hurdle – approval by the European Commission. The Commission said it would monitor the alliance to ensure it remained compliant with EU competition law, a move that was welcomed by the GSF.


The European Commission has extended the block exemption for liner shipping consortia by a further five years, until April 2020. The move has nothing to do with the mooted P3 alliance; as with all block exemptions, Brussels carries out regular reviews to ensure that they are still beneficial and not distorting competition. The Maritime Consortia Block Exemption Regulation allows shipping lines with a combined market share of below 30% to enter into cooperation agreements to provide joint services. The first consortia block exemption regulation was adopted in 1995 and has been prolonged several times. However, the Commission said it would continue to closely monitor market developments and the conduct of companies to ensure that markets remain open and competitive, “particularly in the context of recent developments in the sector”, and might intervene if necessary.

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