Commissioner William P. Doyle’s Follow-up Statement on the Ocean Alliance

On October 21, 2016, the Federal Maritime Commission voted to take no further action to delay the implementation of the Ocean Alliance from going into effect, thus allowing the Alliance to become effective on October 24, 2016. The Ocean Alliance members consist of CMA CGM (w/APL), COSCO Shipping (w/CSCL), Evergreen Line and Orient Overseas Container Lines. Commissioner Doyle stated he would be issuing a follow-up statement to explain terms and conditions that were changed from the originally filed proposed Agreement. This Ocean Alliance agreement was filed with the Commission on July 15, 2016. On August 24, 2016, the Commission stopped the clock on its review and notified the parties that it needed additional information known as Request for Additional Information (RFAI).

Changes to the Ocean Alliance Agreement from its original filing in July to the final version in October fall into three general categories: 1) the scope of the agreement, 2) the Parties’ authority relating to chassis and related services, and 3) the ability of the parties to jointly negotiate and contract.

First, changes were made that clarified the geographic scope, the range of vessel capacity, and the type of information that could be shared between the Parties under the Agreement. In Article 4, the original text broadly listed continents, regions, and some countries that the Ocean Alliance would trade between. In the final version, an appendix was added listing the specific countries included in the Alliance trade. Similarly, the original text only limited the scope of the Agreement to a maximum capacity of 220 vessels of up to 21,000 TEUs, but additional text was added in Article 5.1 to specify a floor of 130 vessels with a minimum weekly capacity of 130,000 TEUs and to clarify that the maximum weekly capacity would total 250,000 TEUs. Final language also provides more specificity in the types of information that can be shared between Parties in Article 5.3 and also adds a subsection that prohibits the parties from sharing information on freight rates, prices, tariff items, confidential service contract terms or conditions, individual customer lists, individual marketing plans or proposals, or individual bids.

Second, the changes to Article 5.10 maintain the limited role that carriers have said they wish to have in chassis. Under the original text, Parties could discuss and reach agreement amongst themselves or with third parties (chassis pools, equipment lessors, etc.) on the use and provision of chassis, containers, and related equipment as well as any other related goods or services. The finalized language, however, only allows the parties to meet and discuss matters related to chassis, containers, and equipment.

Third, extensive changes were made to provisions that allowed for joint contracting and procurement. The final language of Articles 5.2(e) and 5.11 removed some joint contracting authorities entirely and limited the remaining authority to jointly contract for transshipment, barge/feeder services, bunker fuel, and facilities by stipulating that those could only occur outside the United States. Article 5.9 was also significantly altered to follow the framework established in the 2M Alliance Agreement. Under that framework, the Parties must negotiate independently and enter into separate contracts with port terminal facilities, marine terminal services (except where a terminal wants to negotiate with the Parties jointly), tug services, stevedoring services, and other services. On the operations side, though, the Parties can still jointly discuss and coordinate on matters such as port schedules, berthing windows, and other operational matters.

The final Ocean Alliance agreement can be found here: http://www2.fmc.gov/agreement_lib/012426-000.pdf.