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 Hits the Mark By George Lauriat, Editor in Chief, AJOT April 2024 The Coalition of New England Companies, better known as CONECT, held its 28th Annual Trade & Transportation Conference April 9-11, 2024, at the Newport Marriot in Newport, Rhode Island and the event hit the bullseye with a full house of 230 attendees, remarkable content and top notch speakers. The luncheon address was given by Daniel Maffei, Chairman of the Federal Maritime Commission (FMC) and the timing of the remarks couldn’t have been more apt with the demurrage and detention (D&D) issue and the collapse of the Francis Scott Key Bridge in Baltimore after the containership strike. The content of the T&T sessions was outstanding from two perspectives: - Foremost the lineup of speakers at this year’s T&T conference represented some of the most notable names in the business like FMC Chairman Daniel Maffei, Jonathan Gold, VP, Supply Chain & Customs Policy National Retail Federation (NRF), Nicole Uchrin, Managing Director of the Gemini Shippers Association, Michael Sweet, VP Inbound Logistics, Bob’s Discount Furniture, Pedro Silva, Senior VP Hapag Lloyd, Brandon Lloyd, Executive Director, trade policy and programs (TPP), Office of Trade, Ron Marotta, VP International Division, Yusen Logistics, Dr. Walter Kemmsies, economist & chief strategist for the Kemmsies Group, and Peter Friedmann, CONECT’s DC-based counsel, to mention a few.
- And the speakers tackled some of the most pressing challenges to the shipping industry in the various panel discussions. There is a saying that “content is king” and certainly this year’s T&T conference was a parcel of the realm.
All the Ships at Sea One of the more interesting panel discussions was “Ocean Shipping Outlook – What to Watch in 2024.” The panel’s moderator, recently retired Dan Wolf, one of the founding members of CONECT, had a gourmet menu of topics to tackle ranging from the realignment of Ocean Carrier Alliances to Detention & Demurrage (D&D. The realignment of the Ocean Carrier Alliances, which is scheduled to take effect in early 2025, is set to change vessel rotations globally, impacting importers and exporters of all sizes and in all trade lanes. Perhaps the biggest set of changes is the splitting of the 2M alliance of Maersk and Mediterranean Shipping Company (MSC), the world’s two largest containership operators, at the end of the year [a topic that was discussed at CONECT’s 2023 T&T] and the new Gemini Cooperation agreement (not to be confused with Gemini Shippers Association) between Maersk and Hapag Lloyd, the 5th largest containership operator, that is scheduled to start in 2025. (For more information on carrier alliances see AJOT’s April 2024 Ocean Carrier Review edition). Hapag Lloyd is leaving The Alliance (THEA) at the end of 2024 to join Maersk in the Gemini Cooperation agreement in 2025. Although a number of articles had been written about the new agreement, details were sparse. Fortunately, the panel had Pedro Silva, Senior VP of Sales at Hapag Lloyd to fill in some blanks. According to Silva, the main goal that Maersk and Hapag Lloyd want to achieve with their agreement is schedule reliability. And to achieve that aim the carriers plan to adopt a “hub and spoke” system of port calls. Essentially in a hub and spoke system a line haul ship rotation works between hub ports which are connected into the greater network by feeder ships — although these are feeder ships per se but in reality boxships of around 9,000 TEUs. Silva was quick to point out that a hub and spoke system would not be in play in the US as the Jones Act doesn’t permit foreign flag vessels from shifting US freight between US ports. Nonetheless hub and spoke systems do eliminate many port calls. For example, Hong Kong once the world’s largest containerport, is bypassed for calls at Chinese Pearl River ports. One of the questions asked was whether the new agreement would have “blank sailings”? A “blank sailing” is when a carrier “skips” a port in the rotation. The reasons can be any for the skip but for both the shippers and the ports skipped, blank sailings represent an unkept promise and a potential loss of revenue. While Silva made a point of never saying never, when it comes to blank sailing, he believes that the new system would be more reliable as with fewer ship calls the network integrity wouldn't be stressed as much as it is now with weekly multiple calls at a port. Whether this new (and also old) view of carrier scheduling does improve schedule reliability only time will tell, but there is a good chance it will be on the agenda of the next T&T in 2025. The Chairman’s Take The highlight of 2024 T&T conferences was the luncheon speaker, FMC Chairman Daniel Maffei. The timing of Chairman’s address couldn’t be more profound as the FMC’s enforcement, investigations and compliance bureau recently submitted an 81-page brief concluding that MSC should pay civil penalties totaling $63.3 million for allegedly over-charging shippers in violation of the Ocean Shipping Reform Act better known as OSRA. It’s one of the largest penalties ever levied by the FMC, and MSC has vowed to challenge the assessment. Detention & Demurrage (D&D) has been one of the more contentious issues between shippers and ocean carriers, particularly during the recent COVID period. With the legislation now in place to address this and other issues, the role of enforcement lies with the FMC. In his address to the CONECT audience FMC Chairman Maffei, said he viewed the role of the FMC like that of a referee, that while the commission wasn’t trying to “stick it to anyone” the rules needed to be enforced to keep a level playing field that enables the smooth flow of trade. Even though the FMC is adopting the role of a “referee” in the enforcement of OSRA and other regulatory matters, by any measure the current version of the Commission is a far more “engaged” than any iteration in recent history. But this is the beginning of a new regulatory regime for Commissioner Maffei said, “We've come a long way, and we still have a long way to go.” View the Conference Booklet with agenda.
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