[Federal Register Volume 75, Number 213 (Thursday, November 4, 2010)]
[Notices]
[Pages 67970-67973]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-27891]


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FEDERAL MARITIME COMMISSION


Notice of Inquiry; An Analysis of the European Union Repeal of 
the Liner Conference Block Exemption

AGENCY: Federal Maritime Commission.

ACTION: Notice of Inquiry.

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SUMMARY: The Federal Maritime Commission (``FMC'' or ``Commission'') is 
issuing this inquiry to solicit information and comments concerning the 
effects on international liner shipping of the European Union's 
(``E.U.'') repeal of the liner block exemption from competition laws 
that took effect on October 18, 2008. This information will assist the 
Commission in its identification, analysis and evaluation of any 
consequences of the E.U.'s policy decision on U.S. trades, and will be 
incorporated into the Commission's research for An Analysis of the E.U. 
Repeal of the Liner Conference Block Exemption (``E.U. Study'') which 
is scheduled to be completed in late 2011.

DATES: Responses are due on or before January 18, 2011.

ADDRESSES: Submit all comments concerning this Inquiry to: Karen V. 
Gregory, Secretary, Federal Maritime Commission, 800 North Capitol 
Street, NW., Room 1046, Washington, DC 20573-0001.
    Or e-mail non-confidential comments to: [email protected]. (e-mail 
comments as attachments in Microsoft Word)

FOR FURTHER INFORMATION CONTACT:  Dr. Austin L. Schmitt, Director, 
Bureau of Trade Analysis, Federal Maritime Commission, 800 North 
Capitol Street, NW., Washington, DC 20573-0001, Telephone: (202) 523-
5796, E-mail: [email protected].

SUPPLEMENTARY INFORMATION: 
    Submit Comments: Non-confidential filings may be submitted in hard 
copy or by e-mail as an attachment (Microsoft Word) addressed to 
[email protected] on or before January 18, 2011. Include in the subject 
line: ``FMC EU Study--Response to NOI''. Responses to this inquiry that 
seek confidential treatment must be submitted in hard copy by U.S. mail 
or courier. Confidential filings must be accompanied by a transmittal 
letter that identifies the filing as ``confidential,'' describes the 
nature and extent of the confidential treatment requested, and states 
the reason for the request (e.g., commercially sensitive data). When 
submitting documents in response to the NOI that contain confidential 
information, the confidential copy of the filing must consist of the 
complete filing and be marked by the filer as ``Confidential- 
Restricted,'' with the confidential material clearly marked on each 
page. When a confidential filing is submitted, an original and one 
additional copy of the public version of the filing must be submitted. 
The public version of the filing should exclude confidential materials, 
and be clearly marked on each affected page, ``confidential materials 
excluded.'' Questions regarding filing or treatment of confidential 
responses to this inquiry should be directed to the Commission's 
Secretary, Karen V. Gregory, at the telephone number or e-mail provided 
above.
    The Federal Maritime Commission is seeking information and comments 
from interested parties regarding the impacts of the E.U. repeal of the 
liner conference block exemption, Regulation (EEC) No. 4056/86,\1\ on 
the performance of liner shipping in U.S. trades. The adoption by the 
European Union of Regulation 1419/2006 (``Repeal''), on September 25, 
2006, removed the previous block exemption from E.U. competition laws 
as of October 18, 2008. Under European Commission Regulation No. 906/
2009, liner shipping consortia with market shares up to 30% retain an 
exemption for certain activities.
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    \1\ Regulation (EEC) No. 4056/86 included a block exemption from 
E.U. competition laws for liner shipping conferences, which allowed 
them, under certain conditions, to fix prices and regulate capacity.
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Background

    As the expert agency responsible for regulating liner shipping in 
U.S. trades, the Commission has an on-going responsibility to keep 
abreast of changes in foreign laws and regulations that may impact 
liner activities in U.S. trades. The Commission developed the E.U. 
Study as a means of meeting that responsibility, and of determining 
whether or not any impacts on U.S. trades that could be related to the 
E.U.'s Repeal warranted Commission action with respect to its existing 
regulations and oversight activities under the Shipping Act of 1984 as 
amended by the Ocean Shipping Reform Act of 1998.
    In doing so, the Commission was cognizant of recommendations made 
by the National Industrial Transportation League (``NITL'') to the 
Antitrust Modernization Commission (``AMC'') in their October 18, 2006 
comments. NITL told the AMC that, in light of the E.U.'s repeal of the 
liner conference block exemption, it would be appropriate for the 
United States government to undertake a review of the antitrust 
immunity granted under the Shipping Act. NITL stated, in particular, 
that such a review should include an analysis of the impact that the 
changes adopted in Europe will have on the shipment of goods in U.S. 
trades.\2\
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    \2\ See Comments Submitted on Behalf of the National Industrial 
Transportation League, by Attorneys Nicholas J. DiMichael and Karyn 
A. Booth, Thompson Hine LLP, October 18, 2006, page 9.
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    On November 23, 2009, in a public address to several industry 
groups, FMC Chairman Richard A. Lidinsky, Jr. announced the 
Commission's intention to undertake a comprehensive study of the impact 
of the E.U.'s repeal of the liner block exemption on U.S. trades. He 
noted that the E.U. study would cover a five-year period, from January 
2006 through December 2010, and that it would include an analysis of 
changes in liner market structure, competition, services offered, 
vessel capacity, rates and surcharges. He also advised that the 
Commission staff was consulting key industry and customer groups 
concerning the parameters of the study, the proposed research methods, 
and the possibility of future interviews with industry representatives. 
Chairman Lidinsky declared that the Commission intended to publish a 
Notice of Inquiry (``NOI'') in late 2010, and stressed the importance 
he attached to participation by the shipper community in both the

[[Page 67971]]

E.U. Study in general and the proposed NOI in particular.

NOI Participation

    The Commission's research efforts, under the E.U. Study, are 
intended to support a detailed analysis of the impact of the E.U. 
repeal on U.S. trades. The Commission is currently collecting, and will 
be evaluating data and other information on the three main East/West 
trades during the pre- and post-repeal periods. The E.U. Study analysis 
will involve comparing changes in the E.U./U.S. trade lane (North 
Europe/U.S.) \3\ over time and, to the extent that useful comparative 
data is available, across two Asia-based trade lanes (Far East/U.S. and 
Far East/Europe). The NOI questions below--several of which solicit 
information by specific trade lane--are intended to help inform the 
Commission of the experiences and views of all industry sectors, groups 
and individuals willing to participate. It is anticipated that the 
comments provided could prove useful in the Commission's evaluation of 
the data it is currently collecting.
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    \3\ The Europe/U.S. trades are typically separated into two sub-
groups: (1) The North Atlantic trade, and (2) the Mediterranean 
trade. There has been no conference in the U.S./Mediterranean trade 
since February 2006. Consequently there was no conference for almost 
all of the 5-year test period (January 2006-December 2010). Further, 
the U.S./Mediterranean trade involved a good deal of trans-shipment. 
For those reasons, the Bureau has decided to focus its U.S./Europe 
research on the North Atlantic trade.
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    If participating respondents believe that there is a topic related 
to the issue of the impact of the E.U. repeal of the liner conference 
block exemption on U.S. liner trades that is not adequately addressed 
in the NOI questions, they are encouraged to identify and address that 
topic in their comments to the NOI.
    To promote maximum participation by individual shippers, vessel-
operating common carriers, ocean transportation intermediaries, public 
port authorities, marine terminal operators, etc., the NOI questions 
will be made available via the Federal Register and on the Commission's 
Web site at http://www.fmc.gov in a downloadable text file. They can 
also be obtained by contacting the Commission's Secretary, Karen V. 
Gregory, by telephone at (202) 523-5725 or by e-mail at 
[email protected]. Please indicate whether you would prefer a hard copy 
or an e-mail copy of the NOI questions. Non-confidential comments may 
be sent to [email protected] as an attachment to an e-mail submission. 
Such attachments must be in Microsoft Word.
    The Commission intends that the E.U. Study be as thorough as 
possible, and therefore encourages prospective NOI participants to 
address all relevant questions with detailed comments. There is, 
however, no requirement that participants answer all the NOI questions. 
Participants, if they wish, are free to limit their responses to 
questions where they have direct experience or specific views. In 
addition, although many of the NOI questions are designed to elicit 
responses from a broad range of industry participants, the eight final 
questions are addressed specifically to vessel-operating common 
carriers.
    The Commission anticipates that most filed NOI comments will be 
made publicly available. The Commission believes that public 
availability of NOI comments is to be encouraged because it could 
improve public awareness of the issues being addressed in the E.U. 
Study, and of the various perspectives of all interested parties. 
Nevertheless, some commenting parties may wish to include commercially 
sensitive information as relevant or necessary in their responses by 
way of explaining their liner shipping experiences or detailing their 
responses in practical terms. To help assure that all potential 
respondents will provide usefully detailed information in their 
submissions, the Commission will provide confidential treatment to the 
extent allowed by law for those submissions, or parts of submissions, 
for which the parties request confidentiality.

FMC E.U. Study Notice of Inquiry Questions

    Identifying Information (Please provide the information requested 
below with your NOI response.)

Name of Respondent: (individual)
Respondent's Title/Position:
Contact Information: Telephone and E-mail
Name and Address of Company or Other Entity:
Type of Company or Other Entity:
    Beneficial Cargo Owner (BCO)
    Ocean Transportation Intermediary (OTI)
    Shippers' Association
    Vessel-Operating Ocean Carrier (VOCC)
    Public Port Authority
    Other, please describe (e.g., marine terminal operator, trade 
association, government agency, etc.)

Section A: General Questions

    1. Based on your experience since September 2006 (when the European 
Union announced its decision to terminate the block exemption for liner 
shipping conferences to take effect October 2008), what impacts, if 
any, have you identified on your company's commercial activities, in 
any trade lane, that you would attribute to the termination of the E.U. 
conference block exemption? Please explain. If you believe there have 
been such impacts, please indicate when that impact first occurred.
    2. Based on your experience since October 2008 (when the E.U. 
exemption for liner conferences was terminated) has any class of 
shipper or class of vessel-operating common carrier received a 
competitive advantage or been put at a competitive disadvantage as a 
result of the E.U. decision to terminate the exemption? If so, please 
explain.
    3. Based on your experience since October 2008 (when the E.U. 
exemption for liner conferences was terminated), have differences 
between U.S. and E.U. liner shipping competition regulations created 
any problems for your company? If so, please explain.
    4. Does your company view cooperation among ocean carriers in 
operational agreements (e.g., vessel sharing agreements, alliances, 
consortia, etc.) as generally having a positive, neutral or negative 
impact on the availability or cost of liner shipping services? Please 
explain. Does the E.U. market share threshold of 30% for such 
operational agreements have any effect with respect to that impact? If 
so, please explain.

Section B: Questions about the North Atlantic Trade (North Europe/U.S.)

    5. Approximately what percent of your company's freight earnings 
(lines, OTIs) or shipping expenses (shippers) involves international 
shipping in the North Europe/U.S. trade? Does your company's business 
involve US imports (westbound service) only, U.S. exports (eastbound 
service) only, or both? Please explain briefly.
    6. How, and to what extent, did the recent economic recession 
(2008-2009) affect your company's liner shipping-related business in 
the North Europe/U.S. trade? Please explain.
    7. Based on your experience prior to July 2008, when the Trans-
Atlantic Conference Agreement (TACA) disbanded, did the existence of 
TACA have any impact on your liner shipping-related business in the 
North Europe/U.S. trade? If so, please explain.
    8. Based on your experience in the period from October 2008 to the 
present (i.e., since the E.U. block exemption was terminated), has 
there been any significant change(s) in liner services in the North 
Europe/U.S. trade that you attribute to the E.U. terminating the

[[Page 67972]]

block exemption? For example, changes in:
    a. the level of freight rates and surcharges;
    b. the frequency with which rates or surcharges are adjusted upward 
or downward (rate volatility);
    c. the assessment of surcharges;
    d. the level of competition among ocean carriers;
    e. the service contracting practices or terms offered by ocean 
carriers;
    f. the availability of vessel capacity and container equipment; or
    g. the level or quality of liner services (including customer 
service, billing accuracy, etc.)
    If so, please identify and explain those changes.
    9. For CY 2010 to date, please estimate the percentage of your 
annual business (by volume) in the North Europe/U.S. liner trade that 
moved under (a) annual (or longer) service contracts, (b) shorter-term 
freight agreements, (c) spot rates, and (d) other (please specify). Has 
that changed significantly since October 2008? If so, please explain.
    10. Following repeal of the E.U. block exemption, ocean carriers 
created a global information system under Container Trade Statistics, 
Ltd. (CTS) in which a majority of ocean carriers serving the North 
Europe/U.S. trade participate. CTS provides certain data free on its 
Web site, including indices of the carriers' aggregated average revenue 
per TEU by month. CTS also sells other data. To what extent, if at all, 
does your company access and use CTS Europe/U.S. trade data, and (if it 
does so) for what purpose(s)?

Section C: Questions about the Transpacific Trade (Far East/U.S.)

    11. Approximately what percent of your company's freight earnings 
(lines, OTIs) or shipping expenses (shippers) involve international 
shipping in the Far East/U.S. trade? Does your company's business 
involve U.S. imports (eastbound service) only, U.S. exports (westbound 
service) only, or both? Please explain.
    12. How, and to what extent, did the recent economic recession 
(2008-2009) affect your company's liner shipping-related business in 
the Far East/U.S. trade? Please explain.
    13. Based on your experience from January 2006 to the present, have 
the activities of the Trans-Pacific Stabilization Agreement (TSA) or 
the Westbound Trans-Pacific Stabilization Agreement (WTSA) had any 
significant impact on your company's liner shipping-related business in 
the Far East/U.S. trades? If so, please explain.
    14. Based on your experience in the period from October 2008 to the 
present, have there been any significant characteristics of liner 
services in Far East/U.S. trades that you attribute to actions taken by 
TSA or WTSA member lines acting collectively? For example:
    a. the level of freight rates and surcharges;
    b. the frequency with which rates or surcharges are adjusted upward 
or downward (rate volatility);
    c. the assessment of surcharges;
    d. the level of competition among ocean carriers;
    e. the service contracting practices or terms offered by ocean 
carriers;
    f. the availability of vessel capacity and container equipment; and
    g. the level or quality of liner services (including customer 
service, billing accuracy, etc.)
    If so, please identify and explain those characteristics.
    15. For CY 2010 to date, please estimate the percentage of your 
annual business (by volume) in the Far East/U.S. liner trade that moves 
under (a) annual (or longer) service contracts, (b) shorter-term 
freight agreements, (c) spot rates, and (d) other (please specify)? Has 
that changed significantly since October 2008? If so, please explain.

Section D: Questions About the Europe--Asia Trade (Far East/Europe)

    16. Approximately what percent of your company's freight earnings 
(lines, OTIs) or shipping expenses (shippers) involve international 
shipping in the Far East/Europe trade? Does your company's business 
involve European imports (westbound service) only, European exports 
(eastbound service) only, or both? Please explain briefly.
    17. How, and to what extent, did the recent economic recession 
(2008-2009) affect your company's liner shipping-related business in 
the Far East/Europe trade? Please explain.
    18. Based on your experience prior to October 2008 (i.e., before 
the Far East Freight Conference (FEFC) disbanded), did the existence of 
FEFC have any impact on your liner shipping-related business in the Far 
East/Europe trade? Please explain.
    19. Based on your experience in the period from October 2008 to the 
present (i.e., since the E.U. block exemption was terminated), has 
there been any significant change(s) in liner services in the Far East/
Europe trade that you attribute to the E.U.'s ending of the block 
exemption? For example, changes in:
    a. the level of freight rates and surcharges;
    b. the frequency with which rates or surcharges are adjusted upward 
or downward (rate volatility);
    c. the assessment of surcharges;
    d. the level of competition among ocean carriers;
    e. the service contracting practices or terms offered by ocean 
carriers;
    f. the availability of vessel capacity and container equipment: and
    g. the level or quality of liner services (including customer 
service, billing accuracy, etc.)
    If so, please identify and explain those changes.
    20. For CY 2010 to date, please estimate the percentage of your 
annual business (by volume) in the Far East/Europe liner trade that 
moved under (a) annual (or longer) service contracts, (b) shorter-term 
freight agreements, (c) spot rates, and (d) other (please specify)? Has 
that changed significantly since October 2008? If so, please explain.
    21. Following repeal of the E.U. block exemption, ocean carriers 
created a global information system under Container Trade Statistics, 
Ltd. (CTS), in which a majority of ocean carriers serving the Far East/
Europe trade participate. CTS makes certain data free on its Web site, 
including indices of the carriers' aggregated average revenue per TEU 
by month. CTS also sells other data. To what extent, if at all, does 
your company access and use Far East/Europe trade data, and (if it does 
so) for what purpose(s)?

Section E: Comparisons Among Trades

    22. Based on your experience since October 2008 (since the E.U. 
block exemption was terminated) are there differences in the 
characteristics of the Far East/U.S. trade versus the Far East/Europe 
or North Europe/U.S. trades that you attribute to differences between 
U.S. and European liner competition regulations? For example, 
differences in:
    a. the level of freight rates and surcharges;
    b. the frequency with which rates or surcharges are adjusted upward 
or downward (rate volatility);
    c. the assessment of surcharges;
    d. the level of competition among ocean carriers;
    e. the service contracting practices or terms offered by ocean 
carriers;
    f. the availability of vessel capacity and container equipment; and
    g. the level or quality of liner services (including customer 
service, billing accuracy, etc.)
    If so, please explain those differences.
    23. Please identify any significant similarities and 
dissimilarities (for example, cargo volumes, scope or scale of 
operations, shipper mix, geography,

[[Page 67973]]

market concentration levels, contracting practices, legal requirements, 
etc.) that existed in liner shipping markets in the (1) Far East/U.S. 
trade and the (2) Far East/Europe trade during the period 2006-2010. In 
your opinion, how (if at all) would those similarities and 
dissimilarities likely impact a comparison of liner pricing and service 
behavior across those two trades?

Section F: Additional Questions for Vessel-Operating Common Carriers

    FOR VOCCs ONLY:
    24. Please estimate the percentage of your liner revenues 
(globally) that were earned in each of the following trade lanes during 
CY 2010 to date:

a. North Europe/U.S. liner trade                                   ----%
b. Far East/U.S. liner trade                                       ----%
c. Far East/Europe liner trade                                     ----%
d. All other liner trades                                          ----%
e. Total (all liner trades combined)                                100%
 

    If those percentages changed significantly during the 2006 through 
2010 period, please describe and explain the change.
    25. In each of the three major East-West trades, please estimate 
the percent of cargo your company carried for beneficial cargo owners 
(BCO) accounts, (b) OTI accounts, (c) other accounts (if any, please 
explain) during CY 2010 to date:

------------------------------------------------------------------------
                                          BCO         OTI        Other
------------------------------------------------------------------------
f. North Europe/U.S. liner trade....      ----%       ----%       ----%
g. Far East/U.S. liner trade........      ----%       ----%       ----%
h. Far East/Europe liner trade......      ----%       ----%       ----%
------------------------------------------------------------------------

    Has the relative ranking of shipper types in these trade lanes 
changed significantly during the 2006 through 2010 period? If so, 
please describe and explain the change.
    26. In each of the three major East-West trade lanes, please 
indicate which lanes have tended to be the relatively most profitable 
and which was the relatively least profitable for each year between 
2006 and 2010 (inclusive). [Write M for most, and L for least.]

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                                                 Far East/U.S.         Far East/Europe       North Europe/U.S.
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a. 2006....................................                ------                 ------                 ------
b. 2007....................................                ------                 ------                 ------
c. 2008....................................                ------                 ------                 ------
d. 2009....................................                ------                 ------                 ------
e. 2010....................................                ------                 ------                 ------
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    If those rankings changed significantly during the 2006 through 
2010 period, please explain the reason(s) for the change.
    27. Based on your experience during the period from January 2006 to 
the present, have there been any significant changes in the nature of 
your business in the North Europe/U.S. liner shipping market related to 
changes in:
    a. Seasonality of cargo movements;
    b. Commodity values;
    c. Directional cargo imbalances (imports vs. exports);
    d. Number of carriers serving the trade; or
    e. Minimum scale ( and size of vessels) needed to serve 
the trade efficiently
    If so, please identify and explain those changes.
    28. Based on your company's experience in the North Europe/U.S. 
trade, please identify any substantial changes that occurred in your 
liner business (operations, marketing, pricing, etc.) in the two years 
following repeal of the E.U. liner conference exemption (CY 2009 and 
2010) as compared with the two years preceding the repeal (2006-2007)? 
If any, please explain.
    29. Based on your experience during the period from January 2006 to 
the present, have there been any significant changes in the nature of 
your business in the Far East/U.S. liner shipping market related to 
changes in:
    a. Seasonality of cargo movements;
    b. Commodity values;
    c. Directional cargo imbalances (imports vs. exports);
    d. Number of carriers serving the trade; or
    e. Minimum scale ( and size of vessels) needed to serve 
the trade efficiently
    If so, please identify and explain those changes.
    30. Based on your experience during the period from January 2006 to 
the present, have there been any significant changes in the nature of 
your business in the Far East/E.U. liner shipping market related to 
changes in:
    a. Seasonality of cargo movements;
    b. Commodity values;
    c. Directional cargo imbalances (imports vs. exports);
    d. Number of carriers serving the trade; or
    e. Minimum scale ( and size of vessels) needed to serve 
the trade efficiently
    If so, please identify and explain those changes.

    Now Therefore, it is ordered that Notice of this Inquiry be 
published in the Federal Register.
    By the Commission.
Karen V. Gregory,
Secretary.
[FR Doc. 2010-27891 Filed 11-3-10; 8:45 am]
BILLING CODE 6730-01-P