Commissioner Doyle’s Report on U.S.-China Maritime Bilateral Consultative Meetings
Commissioner William P. Doyle
U.S. Federal Maritime Commission
December 16, 2015
The bilateral maritime consultative meetings between the People’s Republic of China and the United States took place in Suzhou, China, the week of November 1, 2015. I co-chaired the meetings along with Deputy Maritime Administrator Michael Rodriguez. Mr. Wang Mingzhi, Deputy Director-General of China’s Ministry of Transport, headed the Chinese delegation.
The week began with a meeting in Shanghai at the Consul General’s office. We met with the U.S. Consul General Hanscom Smith and his staff members from the divisions of economics, commercial operations, and defense.
Next, the U.S. delegation hosted a meeting with the leadership of the Shanghai Shipping Exchange (SSE) headed by CEO Mr. Zhang Ye. Mr. Zhang is focused on the China’s One Belt, One Road project that is a signature policy goal of China’ s President, Xi Jinping. Mr. Zhang briefed the U.S. delegation on the Shanghai Containerized Freight Index that commenced in 2009.
After the Meeting with the SSE, I met with senior officials of China Ocean Shipping Company (COSCO) and China Shipping Container Line (CSCL) in Shanghai, China. FMC’s General Counsel, Tyler Wood, and the State Department’s economics representative attended this meeting with me. China Shipping Group’s General Counsel, Ye Hongjun, and COSCO Container Lines’ Managing Director, Wang Haimin, hosted the meeting and they brought together their senior leadership teams to discuss important topics affecting the world-wide liner trade.
COSCO and CSCL are in the beginning stages of a merger. I fielded questions from the executives regarding communications with the U.S. Federal Maritime Commission (FMC) as the companies move forward. I advised the companies to work closely with FMC staff. The topics of discussion included the alliances that COSCO and CSCL are currently members of, and, to what extent, that may change during merger talks and post-merger. The FMC’s doors are always open, I explained to the companies. I believe COSCO and CSCL are ready to discuss their future plans with the FMC and they will be reaching out in person to the Commission in the near future. I welcome their engagement with the Commission and staff.
The following day we held the bilateral consultative meetings in Suzhou, China. We reviewed and discussed many matters including the recent chemical explosion in the port of Tianjin, overcapacity in the liner trade, carrier and terminal surcharges, tariffs, potential COSCO – CSCL merger, and China’s pilot program regarding four free trade zones.
I notified the Chinese delegation about recent actions taken by the Commission to start a rulemaking process on relaxing the service contract filing requirements with the FMC. In addition, I explained that the Commission voted that week to grant COSCO Container Lines Europe’s petition for an exemption from the requirement that a government-controlled carrier must wait 30 days before it may lower its tariff rates. Ocean common carriers operating in the U.S./foreign oceanborne trades that are owned or controlled by governments are subject to rate review standards to ensure that they do not unfairly use their government-supported positions against their competitors. The Controlled Carrier Act also requires the FMC to maintain a list of carriers that are majority owned by foreign-governments that operate in the U.S. trades.
I enjoyed meeting the people of Suzhou and Shanghai and holding discussions with our Chinese government counterparts. I look forward to continuing our harmonious working relationship.
I would like to add that post-bilateral meetings, I decided to take an accounting of alliance practices and the rigidity or lack thereof of the alliance operations.
As just discussed in the remarks regarding my trip to Shanghai and Suzhou, China Ocean Shipping Company (COSCO) and China Shipping Container Line (CSCL) had expressed interest in learning more about flexibility with respect to Alliances. COSCO is a member of the CKYHE and CSCL is a member of the O-3 Alliance. These companies are looking for flexibility including transition periods for determining which Alliance a newly formed entity could join, if any. Indeed, these companies are mindful that shippers and customers are not disrupted during any merger phase.
As you can see through publically available data, most of the Alliances currently exist in a form that is quite flexible—meaning that the Alliances rely on ships being contributed to the trade routes within in an Alliance from carriers who are not necessarily members of that specific Alliance. In addition, carrier members of an Alliance charter space to carriers who are not members of a specific Alliance. Finally, many of the carriers participate in services that are outside an Alliance but may be within the geographic scope of the Alliance.
Thank you Mr. Chairman, this concludes my remarks.