Regulatory

Ocean liner shipping

An EU Emissions Trading System for Shipping Would Undermine a Global GHG Solution

Sept. 11, 2020 - On Sept. 10, the World Shipping Council published a paper highlighting serious concerns for maritime trade and global efforts to reduce greenhouse gas emissions if the EU expands its Emissions Trading System (ETS) to include international shipping. The WSC paper focuses on a critical threshold issue for application of the EU ETS to shipping: geographic scope.

The most-discussed geographic application of the EU ETS to shipping is to mirror the scope of existing EU legislation on Monitoring, Reporting and Verification (MRV) of carbon emissions. The EU ETS has been described as a “regional” system, but bringing international shipping into that system using the MRV scope would regulate the operation of ships on several of the world’s seas and oceans, including on the high seas and in waters adjacent to non-EU nations.

“This question of the geographic scope of any ETS system for shipping must be addressed before the European Commission can turn to the many technical details that would be involved in creating such a system. If the current MRV geographic scope is used, a majority of the emissions covered by the system would occur outside EU waters, in many cases from voyages extending thousands of miles across the globe,” said WSC President and CEO John Butler.

Butler continued: “The cargo concerned is not just EU imports and exports; it is also the imports and exports of the EU’s trading partners. This will create trade tensions and raise legal and diplomatic concerns about the geographic reach of a unilaterally imposed emissions charge. The EU would be well advised to avoid extraterritorial application of the ETS.”

If the geographic scope is the same as the MRV GHG reporting regime, the system would also cover significant cargo volumes that are not part of EU trade at all, but are transshipped through EU ports. This would include numerous less-developed countries (LDCs) that would face an extra charge on their trade simply because their goods are routed through the EU. A charge would be levied first on the cargo as it sails into an EU port and then again as the same cargo leaves the EU on another vessel to its ultimate destination.

Equally troubling, the international tensions and disruption caused by an EU ETS with extraterritorial effect would harm the prospects for a comprehensive global solution through the International Maritime Organization.

“Ironically, far from galvanising efforts in the IMO to implement global measures to curb CO2 emissions, an EU ETS is more likely to prevent a global solution. It is unlikely that a government that has set up its own revenue-generating emissions system will dismantle it in favour of a global one,” Butler observed.

Butler concluded: “The EU wants to lead the effort to decarbonize shipping, and that leadership needs to be channelled through the IMO, which is the only place where a global solution can be reached.”

View or download the WSC’s discussion paper: Shipping in the EU Emissions Trading System (ETS): An Evaluation of Regional Regulations Applied on an Extraterritorial Basis

The World Shipping Council's goal is to provide a coordinated voice for the liner shipping industry in its work with policymakers and other industry groups with an interest in international transportation. To learn more, visit: www.worldshipping.org

SOURCE: World Shipping Council

 

Growing Frustration Amongst European Forwarders at Times of Crisis

Sept. 9, 2020 - Recently, various shipping consultants reported in glorious terms about the multi-billion-dollar profits made by carriers at times of the global pandemic. Capacity discipline brought a silver lining to carrier circles: Maersk’s Q2 net profit increased year-on-year from $154m to $443m, despite volumes plunging 16%; Hapag-Lloyd’s net profit increased from $56m to $287m, alongside an 11% drop in volumes; and HMM’s net profit was $23m, compared to a $54m loss in Q2 19, even though its liftings fell 22%. Sea-Intelliigence noted that the combination of stronger rates and lower operating costs had helped those carriers increase their profits by 160%.

Drewry has concluded that ‘shippers should get used to a much more concentrated marketplace in which shipping lines have more power’, while warning that the container shipping costs and service levels are ‘at risk of spiralling out of control.’  The massive withdrawal of capacity since the start of the COVID-19 pandemic – 468 blanked departures on east-west trades – coincided with extremely low schedule reliability of the remaining sailings. Consequently, blanked sailings and poor schedule reliability resulted in widespread rollovers of containers. Whereas some carriers now offer no-roll or guaranteed services, they do so at premium rates, which basically is just a normal service offering at increased price.

Apart from the increase in freight rates, there are other costs implications caused by the operational problems for shippers and forwarders. The costs for the freight forwarding industry are huge: they range from the re-booking of shipments to sometimes even losing customers because there is simply no service made available by carriers.  Let me emphasize that bookings made by forwarders are not some sort of flexible agreements with carriers. At the time of booking forwarders receive a booking confirmation with a clearly identified vessel.  Imagine the extra costs and stress for the logistics sector caused by the blanked sailing and rolled shipments by seeking to make new bookings, detention and demurrage costs, as well as other charges, and financial booking costs.

Carriers blame the pandemic. But at a time when European industry is in a serious recession, and when the competitiveness of European exporters and importers and their service providers – collectively employing far greater numbers of people than carriers, contributing far more to economic prosperity and making bigger investments in Europe, is at risk – everybody is at the mercy of carriers, without tools or means to control their behaviour, at least in Europe.

This comes at a time a few months after joint efforts with shippers and terminal operators to bring liner shipping back under normal competition rules.  Today’s carrier behaviour is excessive and frustrating for many. The prolongation of the Consortia Block Exemption Regulation (CBER) was a missed opportunity to help the container shipping industry become more responsive in its role of serving European exporters and importers, trading in the global marketplace. Whereas carriers are saying that they have the ambition to become more service-minded, the reality proves to be different.

When calling for a repeal of the exemptions from the normal competition rules for consortia, CLECAT made the point that the operational activities that the CBER purports to facilitate are mainly exchanges of information between competing carriers, necessary to give effect to vessel-sharing agreements (VSAs). It is well known that nowadays container carriers have the possibility to exchange data within the framework of their VSAs. The reality today is that carriers operate in alliances with no competition from outside on the main east-west trades with three container shipping alliances that cover 95% or more of the East-West traffic. Modern digital tools allow them to jointly keep space below demand, which is the way to make money.

As so eloquently described by August Braakman in Lloyd’s List, ‘the effects of the exchange of strategically sensitive data within the framework of conference and discussion agreements are significantly reinforced within VSAs/alliances that make use of advanced state-of-the-art logistics solutions and the ensuing semantic interoperability of the computer programmes used by participating lines and possible other actors involved, both towards one another and towards the BI&A system that governs the logistics chain.’  He concludes that the shipping sector uses digitalisation as a vehicle for exchanging strategically sensitive information, which makes exemptions from competition rules redundant.

CLECAT and others also concluded that the evidence to date is that the carriers have used the CBER as a basis to extend the exemption to Voluntary Discussion Agreements, which include prices. The Commission has in our view overlooked the impact of the fundamental drivers of collaborative behaviour in the container shipping industry.  Not willing to look at the alliances, as they have a market share beyond 30%, the fact that the different shipping consortia and alliances are heavily intertwined allowing detailed coordination between them was largely ignored.

The enthusiasm with which the Commission supported the case for carriers to be granted continued generous exemptions from European competition law took us by surprise, in particular since the Commission has no adequate means of monitoring compliance or behaviour. Meanwhile, the surging freight rates seen on the transpacific trade has gained the interest of the Chinese Ministry of Transport, which has reportedly written to six of the largest carriers seeking “an explanation” for the rises. Moreover, the US FMC Commissioner wants a closer review of the blank sailing monitoring.  In the US, regulators analyse the impact vessel capacity changes and capacity projections have on freight rates.

The distortion is more widespread as also highlighted by the International Transport Forum. Following the clearing of state aid of the maritime industry in Italy, CLECAT called on EU Commissioner Vestager to clarify the state aid rules in order to avoid risks of distortion of competition and to ensure a level playing field.

There are now clear cases that more vertically integrated carriers can benefit from tax schemes, which provide incentives for carrier haulage (door-to-door transport arranged by the carrier) rather than merchant haulage (where door-to-door transport is arranged by the shipper or freight forwarder), which obviously is not acceptable to us.

CLECAT now urges European policy makers to address some important questions: Should the EU continue to give excessive privileges to the shipping sector operating as oligopolies at mercy of European supply chains? Should the EU and Member States continue to give state aid and other subsidies – such as tonnage tax – to shipping companies, which are through acquisitions in the supply chain extending business activities where they compete with logistics companies that are not subsidised? Are current EU competition rules still fit for purpose in view these market developments?

SOURCE: CLECAT (European Association for Forwarding, Transport, Logistics and Customs Services)

 

U.S. Transportation Secretary Elaine Chao Makes Historic Announcement on America’s Freight System

Elaine ChaoSept. 7, 2020 - U.S. Secretary of Transportation Elaine L. Chao [on Sept. 3] announced the release of the first-ever National Freight Strategic Plan (NFSP). It is the latest effort by the Department and the Trump Administration to strengthen America’s economic competitiveness. The NFSP lays out a vision for long-term investments in infrastructure, the workforce, and other essential parts of the freight system.

“The Department is unveiling the first-ever National Freight Strategic Plan so that the U.S. can maintain our competitive edge across major industries like agriculture, manufacturing, energy production and E-commerce,” said U.S. Transportation Secretary Elaine L. Chao.

Every day, America’s transportation network moves more than 51 million tons of freight and energy products valued at nearly $52 billion via highways, railways, ports and inland waterways, pipelines, and airports. The growth in freight demand due to increasing use of e-commerce and global supply chains in recent years has strained our freight system, and could threaten the competitive advantage of American businesses. As these supply chains continue to spread across the world, America’s ability to compete could be limited by inadequate infrastructure and a lack of preparation for incorporating innovative technologies.

The NFSP provides a clear path to improve the safety, security, and resilience of the national freight system. It also details how we can modernize freight infrastructure and operations to grow the economy and increase competitiveness. Additionally, the NFSP lays out a plan to prepare for the future by supporting the development of data, technologies, and workforce capabilities that improve freight system performance.

To learn more about the NFSP, visit transportation.gov/freight/NFSP

SOURCE: U.S. Department of Transportation

 

Struggling US importers Granted 90-day Duty Deferment

By Chris Gillis, American Shipper

Port of Los AngelesApril 20, 2020 - Under authority of the White House, Customs and Border Protection (CBP) will allow U.S. importers of certain goods to defer their payments of duties, taxes and fees for the next 90 days, starting April 20.

The temporary duty deferment was included in an executive order signed by President Trump on Friday, April 17, to help American businesses cope with the economic fallout from the COVID-19 pandemic.

“This payment flexibility will be available only for importers with a significant financial hardship and will apply to payments for goods imported in March and April,” CBP said in a press release on Sunday, April 19.

However, the deferment will not apply to imports currently subject to U.S. anti-dumping and countervailing duties or tariffs resulting from the Section 201, 232 and 301 trade remedies. Those duties must still be paid on time by importers, the agency said.

The nation’s customs brokers are expected to work with their importer clients in the coming days to determine which imports qualify for duty deferment.

“For those that are then able to benefit from the 90-day suspension, we will have to dot our ‘i’s’ and cross our ‘t’s’ to ensure that we schedule payments accordingly within the allotted time frames,” Grabriel Rodriguez, president of Doral, Florida-based A Customs Brokerage and an officer with the Florida Customs Brokers and Forwarders Association, told American Shipper.

“This moratorium will be a little bit of a burden administratively due to the conditions under which it is being applied and their short-term timeframe, but we know it is going to be a great financial benefit to our importers.”

“This is a big deal for everyone,” said Amy Magnus, president of the Washington, D.C.-based National Customs Brokers and Forwarders Association of America (NCBFAA). “As a broker, we will have to figure out how to push out the duty payments 90 days for those entries that can be delayed.”

Magnus, who also serves as director of customs affairs and compliance for Saint Albans, Vermont-based A.N. Deringer, said the deferment does not absolve qualifying importers from ultimately paying those duties.

CBP said it is still processing duties, taxes and fees on imports during the national health crisis, adding that it will not return deposits of estimated duties, taxes and fees that have already been paid.

The agency enforces about 500 U.S. trade laws and regulations on behalf of 49 government agencies and remains the second-largest source of revenue for the U.S. government behind income taxes.

SOURCE: American Shipper