A European Union (EU) plan to repeal the antitrust immunity given to a group of shipping lines from October 2008 will help Indian shippers (exporters) move their goods between India and Europe at lower costs, according to an expert.
“In future, individual shipping lines and shippers will have to negotiate with each other to fix ocean freight rates based on market conditions. The most competitive shipping line that gives best services and provide best practices will win the hearts and minds of shippers,” said Rohan Masakorala, convenor of Asian Shippers’ Council, an organization that represents the interests of cargo owners and exporters in Asia.
The EU took a decision last year to end the antitrust immunity given to the India, Pakistan, Bangladesh, Ceylon (IPBC) Conference, a group of 18 shipping lines including India’s state-owned Shipping Corporation of India.
Member lines belonging to the London-based IPBC Conference move all the cargo that are transported by the sea route between Europe and the Indian subcontinent.
“This is the beginning of the end of liner shipping conferences like the IPBC Conference which was collectively setting prices by operating as a cartel,” said Masakorala. From October 2008, shippers will be able to negotiate rates with individual lines.
An official at Hapag-Lloyd India Pvt. Ltd, a shipping line that is part of IPBC, said that the EU’s move would result in exporters being able to negotiate better rates with shipping firms. The official, who did not wish to be identified, added that IPBC’s member lines were scheduled to meet on 11 September in London to discuss the EU’s move and take legal opinion on it.
A liner conference is a group of steamship companies offering equitable freight rates, standardized shipping practices and regularly scheduled services between designated ports. Liner conferences were given antitrust immunity as authorised by the Shipping Act of 1984, a Congressional legislation that set US regulations for the ocean transport industry that has been adopted by other countries or groups of countries.
Masakorala said that the antitrust immunity was a gift given to shipping lines to collectively set prices irrespective of market conditions. By utilizing this right, shipping lines set prices through mutual discussions. “As a result, even when the market for freight rates were down, shippers had to pay higher ocean freight rates,” he said.
The biggest problem, Masakorala added, was that this arrangement gave shipping lines the right to set additional charges such as surcharges during peak season for port congestion and for higher fuel costs that were outside the main ocean freight rates. Eventually, the surcharges became “more than the actual ocean freight rates”, he said.
The EU’s move to repeal the antitrust immunity given to liner conferences will change this. “We expect the surcharges levied by shipping lines that are outside the ocean freight costs and the collective implementation of frequent rate increases not to survive after October 2008,” Masakorala said.
The shippers expect the Federal Maritime Commission of the US to follow the EU and repeal the immunity given to the Transpacific Stabilisation Agreement, a group of 14 container shipping lines that operate between Asia and the US.