Page 12: of Maritime Logistics Professional Magazine (Jul/Aug 2017)

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REGULATORY WATCH

FMC ISSUED AN ORDER ON JULY 19, 2017 GRANTING

MAERSK LINE‘S PETITION FOR A TEMPORARY

EXEMPTION OF SERVICE CONTRACT FILINGS AS

A RESULT OF THE SO-CALLED PETYA VIRUS. THE

CYBER ATTACK INTERRUPTED MAERSK’S ABILITY

TO DETERMINE WHICH SHIPPERS TO CONTACT

IN ORDER TO EXTEND OR RENEGOTIATE CERTAIN

SERVICE CONTRACT RATES.

in order to extend or renegotiate certain service contract rates. Hong Kong from the United Kingdom to China.

Further, even if Maersk were able to identify which contracts I had the opportunity to meet with the leadership of COSCO needed attention, the Petya virus prevented the company from in Washington, DC in early August. According to COSCO electronically fling documents with the Commission. executives, the parties have begun discussions with the U.S

By granting the petition, the FMC allowed Maersk some Department of Justice on the potential merger. The price tag regulatory relief. For instance, Maersk would not require cus- for the deal is valued at $6.3B U.S. dollars. COSCO intends tomers to pay the higher tariff rates to shipments tendered to keep in place OOCL’s listing on the Hong Kong Exchange. during the period of relief. Rather, FMC’s order permitted The OOCL brand, headquarters and management structure is

Maersk to apply service contract rates to shipments that were not expected to signifcantly change. Finally, all OOCL em- agreed upon and fled after the date of cargo receipt without ployees will be kept on board for at least two years. violating the Shipping Act. More to the point, Maersk was able to provide service to its customers on the same commer- Federal Maritime Commission Updates cial terms as it would have had it been able to conclude and its Controlled Carrier List fle contacts and amendments. On July 19, 2017, the Commission updated its list of “Con-

These two cyber incidents can serve as teachable moments trolled Carriers,” or, those ocean common carriers that are ma- for the entire maritime and logistics transportation chain. We jority owned or controlled by foreign governments. The Com- all need to redouble our efforts and secure the best available mission is charged with monitoring foreign government control

IT system protections and practices. of ocean shipping lines. The FMC maintains a list of these com- panies which is periodically updated as circumstances warrant.

M&A Update: Over the past couple of years, the FMC has demonstrated

In July, China Ocean Shipping Company (COSCO) and regulatory fexibility in addressing the burdens for shippers

Overseas Orient International Ltd. (OOIL) announced plans who do business with controlled carriers. For instance, in to merge. China-owned COSCO’s move to absorb Hong 2015, United Arab Shipping Company (UASC) was granted

Kong-based OOIL would create the world’s third largest con- the ability to lower tariff rates without waiting the requisite 30 tainer carrier. OOIL is controlled by the Tung family, which days. However, if UASC wanted to raise rates then they would founded Orient Overseas Container Line (OOCL) in 1969. still be required to wait 30 days prior to implementation.

The Tung family has a long history in the shipping industry Recent consolidation in the container shipping industry has predating modern day OOCL. In addition, the Tung family’s resulted in four notable changes among Controlled Carriers as

Tung Chee-hwa was the frst Chief Executive of Hong Kong. listed below:

Tung Chee-hwa was elected in 1996 by the 400-member Se- ? China Shipping Container Line was integrated into lection Committee prior to the transfer of sovereignty over COSCO Container Lines Company, Limited, which 12 Maritime Logistics Professional July/August 2017 | |