Ref.: HT3274 Consultation on the future of the Maritime Antitrust Guidelines

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1 Polska Izba Spedycji i Logistyki ul. wi toja ska 3/2, Gdynia Tel.: 058/ , ; fax: 058/ pisil@pisil.pl ; Konto: Bank Millennium S.A. nr , NIP: National Member of FIATA, Member of CLECAT Gdynia, 12th June 2012 Ref.: HT3274 Consultation on the future of the Maritime Antitrust Guidelines Polish International Freight Forwarders Association (PIFFA) established 20 years ago is a non-governmental organization, representing today an industry of more than 130 forwarding, transport and logistics firms as well as custom s agencies from all over Poland handling approximately 60% of the Polish international turnover. Our organization representing freight forwarding and logistic industry is recognized by governmental organizations, governmental authorities, private international organizations in the field of all modes of transport including sea. Multinational, medium and small freight forwarders, transport and logistics companies, customs agents are all part of Polish International Forwarders Associations, thus making it the most representative structure of its kind. PIFFA is the National Member of the International Federation of Freight Forwarders Association FIATA based in Zurich as well as Member of the European Association for Forwarding, Transport, Logistic and Customs Services CLECAT in Brussels. Shippers around Europe including freight forwarders welcomed the adoption, at the 25th September 2006 Competitiveness Council, of the Commission s proposal to repeal Council Regulation 4056/86 which became effective in October 2008 subjecting liner shipping to the EU competition rules.

2 Following the repeal of the Liner Conference Block Exemption on the 1st July 2008 the guidelines to maritime transport services - the Maritime Antitrust Guidelines were adopted to ensure a smooth transition towards the full application of competitive rules to the sector - which will expire on 26th September We have studied the Commissions preliminary assessment on the future of the guidelines provided as the staff working document The future of the Commission guidelines on the application of article 101 TFEU to maritime transport services. PIFFA is pleased to be able to submit its contribution on the impact of the repeal of the block exemption in Europe and the future of the guidelines on the application of the EU antitrust rules to maritime transport services bearing in mind the basic aim of our organization - protection of rights and representation of interests of our members and consequently their customers. The regulatory reform in European competition law in respect to liner shipping can not be assessed without taking into consideration the development trends in maritime transport on a global scale especially as far as the container traffic is concerned such as: 1. concentration of container operators - currently 20 container operators represent 72% of the potential of the world s container fleet (compared to 67,7% in 2010), - the first 10 container operators including 4 European shipowners represent 63,6% of the container fleet capacity (in ,2%), - the biggest 3 container operators i.e. Maersk Line, MSC and CMA CGM represent 37,9% of the world s container fleet capacity (in TEU) compared to 28% in 2008, - the consecutive group of 3 biggest container operators i.e. COSCO, Evergreen Line and Hapag Lloyd represent the share of 12,3% only, 2. concentration of container ports the biggest container ports concentrate over 80% of the world s turnover, 20 of which represent nearly 50% of the overall throughput, - the group of the 20 biggest container ports includes 6 European ports i.e. Rotterdam, Hamburg, Antwerp, Bremen/Bremerhaven, St. Petersburg and Goeteborg, - concentration of container handling in world s sea ports is reflected in an increase of concentrating transshipments in the selected biggest container terminals managed by the global port operators,

3 3. concentration of port operators - - the share of 10 biggest global container terminal operators (GCPO) in world s container throughput reached in %, - 20 biggest global container port operators (including also shipping operators being the owners of the terminals) handled in 2011 nearly 65% of the annual world s throughput. On the other hand the regulatory reform in European competition law in respect to liner shipping can not be assessed leaving aside other elements like: - the global economic crises, which coincided with the changes of law, having significant impact on maritime sector especially on container shipping, - poor investment decisions in ship orders exceeding demand forecasts, - systematic decrease of the world s fleet productivity measured as t/dwt amounting currently 6,04 t/dwt compared to 8,0 t/dwt in 2006 which means that the dynamic of sea trade increase was much lower that the dynamic of tonnage increase, - the so called slow steaming practice (to slow down the speed of the vessel) taken by container operators in reaction to the dramatic increase of bunker prices, decreased demand for transport services as well as overcapacity of the container fleet potential, - disturbances on container market, destabilization of freight market as the result of the excess of container fleet as well as lack of empty containers (side effect of slow steaming) deepened in 2011 by the global financial crises. The recession and financial crises affected everyone including shipping lines and did not even spare the biggest ones see the example of the shipowner CMA CGM showing for the 3 rd quarter 2011 gross income of 3,86 billion US $ but simultaneously making loss of 223 millions US $. In the situation Maersk Line was the first to respond. The shipping line focused on introducing on Far East Europe route Daily Maersk service offering every day departure from Asian ports to Europe as a condition for the improvement of the effectiveness. Some of the shipping lines are considering other solutions, either the withdrawal from the container transport (MISC) or seeking the possibility to acquire new capitals (ZIM), others looking for alliances (MSC & CMA CGM, G6 Group).

4 Despite the dominant position container operators have recognized that the traditional moves on their part like raising artificially the freight rates by withdrawing shipping capacity from the market, introducing slow-steaming and in fact in both cases passing extra costs on customers (extended time of delivery, necessity of keeping bigger stocks) are not sufficient. Systematic worsening of their financial results on the basic economic activity of i.e. providing transport services, resulted in focusing their attention to seek other sources of income as a form of compensation. New tendency is being emerged in: - introducing on a large scale freight surcharges. Apart from traditional surcharges like CAF (Currency Adjustment Factor) or BAF (Bunker Adjustment Factor) there is a very wide range of different freight additionals, some of them very peculiar, constituting often very considerable part of the sea freight cost (example Emergency Equipment Surcharge at the amount of US $ 400 per container). Maersk Line publishes on their website the list of 107 freight surcharges which were or are currently in force. Consultants Seaintel (not disclosing the name of the operator) informed on their website about the possibility of charging in certain circumstances 542 sea freight additionals (named also as assessorial charges, arbitraries, differentials, ancillary charges). Every operator is independent in introducing surcharges, nevertheless in practice we observe that shipping lines follow generally the pattern, - BAF Bunker Adjustment Factor is still often used as a revenue generator rather than for costs recovery, - THC Terminal Handling Charge the tendency marked in the Competition Report from October 2009 produced by Ben Hackett on behalf of Raven Trading Ltd., for the European Commission Terminal handling charges during and after the liner era is being continued. THC is used by container operators as the instrument to compensate losses on a basic activity. Container operators decisions in this field take different forms not always fair, not always transparent, not mentioning the general trend to increase the THC level above the official terminal tariffs. The system is being spread throughout the countries/ports/terminals with the traditional charging mechanism i.e. where the payment of terminal charges is settled directly between a terminal and the customer (generally a freight forwarder) ordering the respective port services, without the intermediary of the shipping line. This is the case of Poland which we would like to elaborate in details. In 2009 THC was introduced by MSC and was strongly opposed by customers including freight forwarders who complained about these charges being non-transparent, unjustified and baseless. The shipping line decision

5 entirely disregarded the definition of liner terms (definition which was promulgated as the custom of the port by the Polish Chamber of Commerce) confirmed by traditional long-standing practice in Polish ports and being reflected in terminals tariffs. Despite the collision between customs of Polish ports as above in the result of the introduction of THC at Gdynia, MSC clients were supposed to pay more. The comparison of operational costs showed the unprecedented increase of 87,55% per 20 and 44,09% per 40 respectively. The comparison was made between MSC THC and official terminal tariff rates only, whereas it is not a secret that nearly all customers including forwarders had individual arrangements with the terminal which made the difference even much higher above the figures. It explains the high frustration with the new system influencing the appraisal of the shipping line behind it, especially that nothing was changed as far as the procedures and terminal operational system were concerned which meant that the workload for a freight forwarder remained at the same level. As a result of very strong reaction and protests lodged by our organization with the top management of the shipping line the level of the THC rates proposed initially was significantly decreased although in certain cases still exceeding the rates arising from the bilateral agreements between a freight forwarder and the terminal. For the sake of good order it is also worth mentioning that introduction of THC by MSC coincided with the decision of their competitor i.e. Maersk Line to move the service from the port of Gdynia to Gda sk. Quite recently freight forwarding industry and other customers of the Deepwater Container Terminal (DCT) in Gda sk were faced with the Maersk Line decision about the change in the method of collecting the terminal handling charge in the port of Gda sk. Again the time of announcing the decision by the line was not coincidental. It came just after the failure of the negotiations between the terminal DCT and the G6 alliance (APL, Hyundai Merchant Marine, Mitsui OSK Lines, Hapag-Lloyd AG, Nippon Yusen Kaisha, Orient Overseas Container Line). In fact having successfully getting rid of the potential competitor Maersk Line is holding currently a monopoly on DCT having exclusiveness in providing container transport services from/to Gda sk on Europe-Asia route. - as part of the typical strategy of global liner operators, they tend to enter into direct relationship with exporters/importers offering combined transport services covering the whole route (store-door delivery) eliminating other players in the supply chain including freight forwarders. As an example of such practices is Maersk Line s dedicated rail services introduced just recently, connecting the terminal DCT Gda sk with inland containers terminals in the south of Poland. The shipping line offers two dedicated rail connections from DCT terminal in Gda sk: Maersk Amber

6 Express with Schavemeker inland terminal in K ty Wroc awskie and Maersk Baltic Express with the terminal in S awków. 80% of the world s goods turnover is currently transported by sea. It is expected that in 2020 the volume will grow by 36-40% increasing the share of sea transport up to 85%. Considering goods turnover of the EU being the integral part of the world s trade, the share of sea transport in serving for example exports reached 59% that is why we treat the subject very seriously. We realize that the points we have raised do not exhaust the whole problem, our intention is to indicate the most visible signs of activities undertaken by global container operators which in our opinion have a negative impact on general market situation first of all as far as the prices are concerned. We see it as a very dangerous occurrence which can be one of the most significant factors contributing to disturb the balance of the trade exchange and trade relations. Assuring you of our best attention, we remain Yours faithfully, Marek Tarczy ski President of PIFFA s Board Placówki regionalne: Szczecin, ul. Malczewskiego 5/7, tel.: 091/ , fax: 091/ ; management@hartwig.szczecin.pl