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January 26, 2024 42 mins

Topic of the Week (1/26/24):

Let's take a look at the great alliance reshuffle...

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UPDATE: FMC's Agreements Library is back up! Here is the exit language from THE Alliance as of the 11/21/2019 amendment:
ARTICLE 7:  DURATION AND TERMINATION OF AGREEMENT   

7.1 This Agreement shall be effective as of the later of April 1, 2017 or the date it becomes effective under the U.S. Shipping Act of 1984, as amended, and shall continue in effect until April 1, 2030.  Thereafter, the Agreement will be automatically renewed for additional one (1) year terms unless terminated by a Party or Parties according to the provisions of this Article 7, unanimous agreement of the Parties, or withdrawal of all but one of the Parties.  

7.2 Any Party shall have the right to withdraw from this Agreement without financial or other penalty by giving twelve (12) months’ written notice, provided that such notice may not be given prior to April 1, 2023.  

Discussion Note/Correction:
It appears Hapag-Lloyd may, upon one year notice, withdraw from the agreement as long as it's announced after April 1, 2023 (which it was).
(not legal advice, just educational discussion)
(this corrects the discussion in this podcast)
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The Maritime Professorᵀᴹ presents By Land and By Sea - an attorney breaking down the week in supply chain

with Lauren Beagen (Founder of The Maritime Professorᵀᴹ and Squall Strategies)

Let's dive in...

1 - The Federal Maritime Commission is still working through three rulemakings. No new movements.

1(b) - The FMC will host an informal hearing on the Red Sea and Gulf of Aden on February 7 (in person and virtual).
https://www.fmc.gov/fmc-announces-hearing-on-shipping-conditions-in-the-red-sea-2/

1(c) - The FMC's online applications are down. (Update at 2:05pm - they're back!)

2 - Hapag-Lloyd AG to utilize a land bridge through Saudi Arabia

from gCaptain and Reuters:
https://gcaptain.com/hapag-lloyd-to-offer-land-bridge-option-through-saudi-arabia/?subscriber=true&goal=0_f50174ef03-54e62442fe-170405670&mc_cid=54e62442fe&mc_eid=26e13788e2

3 - Four Senators (Senators Tim Kaine (D-VA), Todd Young (R-IN), Christopher Murphy (D-CT), and Michael Lee (R-UT)) sent a letter to the Biden Administration re: the Presidential authority for Red Sea military engagement.
https://www.kaine.senate.gov/imo/media/doc/12324yemenwarpowersletter.pdf

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Transcript

Episode Transcript

Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:47):
So by now we've all heard alittle something about the
Gemini cooperation, but you knowthey had me thinking it's about
time we look back at thegreater landscape of ocean
alliances and the many changesthat are actually happening,

(01:09):
that have been happening overthe past few months.
It's the great alliancereshuffle or something like that
.
Let's just take inventory ofall the moving parts recently.
Hi, welcome to, by land and bysea, an attorney breaking down
the weekend supply chainpresented by the maritime
professor me.
I'm Lauren Beagen, founder ofthe maritime professor and
squall strategies, and I'm yourfavorite maritime attorney.

(01:31):
Join me every week as we walkthrough both ocean transport and
surface transport topics andthe wild world of supply chain.
As always, the guidance forgeneral and for educational
purposes only.
It should not be construed withlegal advice and there's no
attorney client privilegecreated by this video or this
podcast.
If you need an attorney,contact attorney.
So before we get into thediscussion of the day, let's go

(01:53):
through my top three stories ofthe week.
All right, story number one asalways, we're going to keep it
top of mind.
I'm hoping we're going to getsome clarity or some some
movement soon.
But we're watching the three FMCrule makings that are going on.
The federal maritime commissionhas been tasked with doing
three different rule makings andthey have one Request for

(02:13):
information that's out there toon the maritime transportation
data initiative.
So I'm watching all of thisright.
We have the definingunreasonable if we still
negotiate with respect to vesselspace accommodations provided
by an ocean common carrier.
That last had movement July2023 from the FMC, from the
agency.
We're also watching billingpractices of detention to merge.
That last closed December 2022.

(02:34):
There's some congressionalstuff going on there, but the
last thing that we got from theagency, appreciably from the
rulemaking side of it, wasDecember 2022.
So we're I'm hoping we get somemovement there soon.
And the one that we're stillwaiting on any language on,
although Elbide, the FMC hassaid that they Partially address
this with the unreasonablerefusal to do a negotiate

(02:55):
rulemaking.
But that's the defining unfair,unjust, discriminatory methods.
We're still waiting on languagethere.
They said that they will beaddressing the unresolved or the
unaddressed pieces of thatSeparately in this, in a third
rulemaking and again themaritime transportation data
initiative.
They had a request forinformation go out.
You know, I'm hopeful thatwe're going to maybe see another

(03:16):
RFI round coming.
I had heard previously thatmaybe we would.
I think Commissioner Bensal hadmentioned that, that they might
be doing that.
So I'll keep watching.
I'll see what happens.
But just a status updatenothing, nothing happening much
there yet.
But you know, as a story numberone, part B, I guess we'll call
it FMC related, it's just areminder that the upcoming

(03:38):
hearing on shipping conditionsin the Red Sea, the federal
maritime permission announcedthat they're going to be
actually extending that hearingExcuse me likely based on the
high level of interest in thehearing to a second day if
needed.
Initially, when they firsttalked about this, they said
they were only going to behaving it on February 7th.
Now they've said, and February8th if needed, they said,

(04:00):
interestingly said that theywould like to seek a balance
between the viewpoints of thosepresenting and, if needed, will
actually invite panelists, inaddition to accepting
presentations from only aselection of those who are
submitting a request to present.
So you can submit a request topresent has to be in by January
31st.
So we're closing in on thatdate.
But it was interesting.

(04:20):
I thought it was justinteresting, I'm not reading too
far into it, but interestingbecause you know they want to
maintain the balance of voicesand maybe that means that they
have an overflow of shippersrequesting to be part of the
hearing.
I'm not sure, but they saidthey want to make sure that they
hear from all sides.
That's great.
I love to see it.
So you know the actual hearingis not for another few weeks.
September excuse me, september1 month are we in?

(04:41):
February 7th is coming up, butJanuary 31st is when you have to
have your information or yourrequest in.
So what they said is interestedparties can request to be
considered as a participant orshare information and comments
by written submission untilJanuary 31st.
Like I said, the hearing itselfis going to be Wednesday,

(05:01):
february 7th, and it's actuallygoing to be at the surface
transportation board, but itwill be live streamed.
So if you want to present or bepart of that or consider to be
part of that actuallypresentation piece of it.
You have to be there in person,otherwise they're going to have
a live stream, so I'll bewatching it from the live stream
and I think this is going to bepretty interesting.
I've seen a lot of people payingattention to the fact that the

(05:24):
FMC is leaning in on this.
So just what is the hearinggoing to be covering?
Just really quickly, it's goingto be examining the conditions
of the Red Sea and the Gulf ofAden and how that's impacting
commercial shipping and globalsupply chains.
Of course it is right.
I think we all know that by now.
I've even started to see it,started to see it on the nightly
news.
Finally, but the hearing itselfwill allow stakeholders in the

(05:48):
supply chain to communicate withthe Commission how operations
have been disrupted by attackson commercial shipping emanating
from Yemen, steps taken inresponse to these events and the
resulting effects.
So that's directly from thepress release from the
Commission it said.
In addition, the hearing willallow the Commission to gather
information and identify any newissues relating to these
disruptions subject toCommission statutes, such as

(06:10):
implementing contingency feesand surcharges.
They've mentioned a fewdifferent times that they're
watching surcharges andcontingency fees and that they
need to be in compliance withthe FMC or certainly the
Shipping Act statutoryrequirements.
So I think this is going to beinteresting.
You know, it is what it is inthe area.
It's troublesome for allparties involved.

(06:33):
But this is interesting, thatthe FMC wants to stay visibly
ahead of it.
Where they had taken a fewcritiques, I think during the
COVID congestion 2021 years,they didn't really have a
hearing, but it was also COVIDright, so it was a little bit
difficult.
They weren't as visible and soI see this as partially a
visibility thing, but certainlyI think that they're hopeful.

(06:55):
If there's anything thatthey're not considering that
that comes out, it's an informalhearing.
It doesn't really really matter, but it's an informal public
hearing, so I like it.
I think this is a good idea andyou know a Part C, I suppose,
on this.
One more thing from the FMCstory, number one, part C Just
today they actually announcedthat they're having trouble with

(07:16):
a lot of the FMC onlineapplications, so the
announcement went out just aboutan hour ago.
Several FMC applications arecurrently experiencing issues.
It said please be advised.
Fmc's headquarters building isexperiencing unscheduled
technical outages.
Relating to this is publicaccess.
Relating to SIRVCOM, sirvcom,the FMC-18, the OTI list, the

(07:36):
agreements library, which I haveactually noticed over the past
few days has been out, and a fewdifferent other the reading
room, which is where you get allyour dockets, oti, license
renewal, some of the major onesright.
I certainly ran into that thisweek.
Like I just said, preppingactually for today's broadcast,
I was trying to pull informationfrom the agreements library.
So I'll mention as we go thatsome of the information that I'm

(07:59):
relying on or talking abouthere is potentially outdated.
As an overview caveat, theinformation that I mentioned
from the Alliance agreementsfiled with the FMC is
information that may be outdatedor incorrect, shouldn't
agreement have been filed in themeantime, in the past few days
or however long it's been out.
But when we get into thatdiscussion I'll mention that
specifically with a little bitmore detail.

(08:20):
But I just I wanted to let youknow that, not only if you
hadn't noticed that it was out,it is out and that some of the
language or some of thediscussion that we're going to
be talking about later ispotentially outdated, shouldn't
agreement or an amendment havebeen filed.
But we'll get.
I'll make sure to mention thosecaveats when we get there.
All right, story number two.

(08:41):
So this story is out ofG-Captain and Reuters.
So story number two isinteresting in that there's
another land bridge beingdiscussed.
So, as you know, because you'rean avid listener of the show by
land and by sea, and also, howcan you avoid the news?
Both canals are having troubleright the Panama Canal and the
Suez Canal.
The Panama is having to dealwith the drought that is forcing

(09:01):
them to limit vessel sailingsthrough the canal.
We've been talking about thatsince last spring.
That led to the announcement byMarist last week that they
would be using a land bridge.
They'd be railing the cargo andkind of foregoing the Panama
Canal is my understanding.
And now this week, with theSuez and the Red Sea attacks by
the Houtis that are forcing manycarriers to go the long way
around Africa.

(09:21):
Just this week Houtbeg Lloydannounced that they would be
offering a land bridge as wellfor the Suez area.
So Houtbeg Lloyd said that theywould offer a land bridge
through Saudi Arabia to helpmitigate the impact of business.
You know, I'm actually reallyencouraged by the creative
measures some of the oceancarriers are taking here.
It's a long way around to goaround South America.

(09:42):
It's a long way around, to goaround Africa.
I think it's great that they'retrying to help mitigate the
impacts of the movements ofgoods, because it really is
coming down to managing what youcan control and what you can't
control, and I like to see thecreative solutions.
You know everything's going tohave their trouble spots and I
think that you should certainly,for any of your business

(10:04):
decisions, make your owndecisions here.
But I think that it'sinteresting and it's great to
have creative ideas come to theforefront here and bridges.
I'd classify that as a creativesolution.
So I think it's cool and we'llsee if it's helpful.
I think that that's part of itis potentially being less

(10:25):
disruptive, though there hasn'tbeen a ton of disruption other
than the initial delay when allthe vessels had to go around.
But I don't know.
I'm still watching all of this.
I think that it's interesting,like you said, the creative
solutions happening here.
Story number three is kind oftangentially related to story
number two and that it alsodiscusses the Red Sea.

(10:47):
You know I haven't gone too farinto too many specifics on the
Red Sea.
There are certainly more expertpeople on geopolitical conflict
, military intervention, and Idon't really want to go too far
into it because I want to stayon the ocean shipping the kind
of operational, regulatorydiscussion side of it.
But I saw this pop up this weekand I thought, huh, no, that's
interesting.

(11:07):
So this week a letter sent byfour US senators to the Biden
administration was sentregarding the Red Sea.
So the letter was signed bySenators Tim Kaine, who's a
Democrat from Virginia, toddYoung, who's a Republican from
Indiana, christopher Murphy,who's a Democrat from
Connecticut, and Michael Lee, aRepublican from Utah.
So I mean bipartisan right.

(11:27):
We got two and two.
So in the letter it said thatthe senators actually condemn
the repeated Houthi attacksagainst international cargo
ships.
Of course they do right.
But of course they condemn therepeated Houthi attacks against
international cargo ships and USmilitary assets protecting
those ships in the Red Sea.
But this is what I foundinteresting they call into
question, or at least in part,the administration's response to

(11:48):
the attacks and the use of USmilitary intervention because,
as they know, and I quote, thisis a quote most vessels
transiting the Red Sea are notUS ships, which raises questions
about the extent to which theseauthorities can be exercised".
End quote.
That's from the letter.
The authorities they know arethat, and I'm quoting here again

(12:10):
from the letter as Commander inChief, you and their addressing
President Biden you have thepower and responsibility to
defend the United States.
Under Article II of theConstitution, directing military
action to defend US personneland military assets from attacks
and imminent attacks is clearlywithin the boundaries of the
presidential power.
They could also be argued thatdirecting military action to

(12:31):
defend US commercial shipping iswithin that power, end quote.
So that's from the letter.
So they're— kind of callinginto question the military
action and the defense of thecommercial shipping and kind of
the ongoing imminency of it.
So there's four questions thatthe letters pose to the
administration.

(12:51):
I'm just gonna run through thembecause I want you to kind of
hear what the tone and what'shappening with.
This letter is only about apage and a half, so go look at
the links that I'm gonna providehere and go take a look at the
letter yourself.
But the four senators in theletter asked the following four
questions.
So one what is youradministration's understanding
of self-defense in the contextof these strikes, especially if
the strikes are not deterringongoing and future attacks from

(13:14):
the Houthis?
Question two youradministration has to date only
submitted one notification toCongress under the War Powers
Act, despite having conductedseveral rounds of strikes
against Houthi targets, werequest an explanation in
writing of the legal authorityunder which the administration
is carried out each of thesestrikes and for carrying out any
strikes against Houthi targetsthat occur after receipt of this

(13:37):
letter, including anypreemptive strikes.
That's a big question too.
Question three does youradministration believe that
there is legal rationale for apresident to unilaterally direct
US military action to defendships of foreign nations?
That, I mean, that's that's abig question.
And question four on what datewere US forces introduced into

(13:57):
hostilities in Yemen and the RedSea?
Interesting, right?
So they're basically sayingthey're calling you to question
and, like I said, this isbipartisan.
They're calling you to questionthe response and the continued
response and the, the strikesagainst the Houthi targets and
the kind of authority to do so.
Interesting.
I just found that interesting.

(14:19):
I haven't seen or heard muchsince I kind of came across that
letter earlier this week.
We might not get much there,but interesting.
I just I want to bringinteresting stories to you guys.
I want you to kind of also havethose moments just along with
me, all right?

(14:39):
Well, those are the stories ofthe day, so let's get into the
meat and potatoes of the day.
So last week we reported on theMaristkenhapagloid announcement
that they're entering into thisoperational agreement and I
thought it might be a good timeto kind of go over alliances as
they stand now.
Right, the movement's expectedthe upcoming EU block exemption
repealed Don't forget about that.
And well, let's just do a bigoverview of all of it.
So let's, let's kind of start,let's make sure we're all on the

(15:01):
same page here.
So what happened last week?
So, from the announcement,maristkenhapagloid signed an
agreement for a new long termoperational collaboration.
They're calling it the Geminicooperation.
It's scheduled to startFebruary 2025.
They say that the ambition isto deliver a flexible and
interconnected ocean networkwith industry leading
reliability.
And just a little note so thisis Maristkenhapagloid.

(15:23):
So Marist was the one thatannounced the land bridge for
the Panama Canal and Hapagloid,just this week, was the one
announcing the land bridge forthe Red Sea area or the Suez.
I should say, you know, they'resaying that the ambition is to
deliver a flexible andinterconnected ocean network
with industry leadingreliability.
I mean they're both exhibitingflexibility.

(15:45):
Like I said, I think that thoseare creative solutions and to me
that seems like that'sflexibility.
I mean, the cooperation hasn'tstarted necessarily formally yet
right, that doesn't start untilFebruary 2025.
But I think they're bothexhibiting, at least at least
from these two stories, thatthey're certainly capable of
being flexible.
So I just I noticed thatparallel.

(16:07):
I wanted to mention it.
I also noted last week that itseemed like this is a new global
ocean alliance, but I haven'tseen the Alliance Agreement
paperwork in the agreementslibrary of the FMC yet.
Maybe doesn't mean anything,but look, that's why I keep
calling it a long termoperational collaboration
instead of an alliance.
Just yet I've seen reportingsaying that this is an alliance,

(16:28):
but I mean, like I said, theagreements library is down but I
haven't seen anything filed yet, and we're going to talk about
that in a minute too.
We're going to talk about ifthat matters.
But regardless, like I said, Iwanted to take a minute to
refresh on what an alliance isand kind of maybe go over the
requirements for filing analliance as well as maybe a

(16:49):
bird's eye view of what'scurrently out there.
So we've done an alliance 101before, so we're not going to go
fully, fully into this, but Idid want to make sure that
everybody was kind of on thesame page.
So what are alliances anyways?
Well, they're basically vesselpooling arrangements, right?
They're kind of operationalcooperations with the use of
vessel sharing.

(17:10):
One of the general purposestatements taken from one of the
agreements has the purpose ofthe alliance to be to authorize
the parties to share vesselswith one another, charter and
exchange space on one another'svessels and to enter into
cooperative working agreements,arrangements in connection with
the party services andoperations in the trade in order
to improve efficiency, minimizecosts and provide high quality

(17:32):
services to the shipping public.
So I mentioned that.
I borrowed that as one of thepurposes stated on one of the
alliance agreements and I alsomentioned that the alliance the
agreements library of the FMCwas down.
Let me stop right there.
All of these agreements thatare filed with the FMC are
publicly filed agreements andyou can go check out the

(17:55):
specifics of them.
They are filing these with theFMC and they're available for
you to look at as long as theagreements library website is
working.
But you can go check it outthat you can see the different
amendments that have been filedthat have made modifications.
But it's pretty interestingthat you can just go see the
direct language.

(18:15):
You don't have to rely on maybethe secondary news reporting of
it you can go see what theactual intention in the
agreements that are filed withthe FMC were.
So what does all this mean?
Vessel sharing agreements is thepooling of ships right.
For a long time the industrydidn't make a lot of money.
Hard to believe with the pastfew years, but they didn't.
And in 0809, 2010, they werelucky to be out of the red.

(18:37):
So the companies startedlooking at vessel sharing space
to help streamline cargomovement.
So in describing what they are,sometimes it's also helpful to
describe what they're not.
So what are?
What are?
What's not part of an alliance?
Trying to figure out how toappropriately say that what is
not part of an alliance.
They're not a rate setting club.
They're not allowed to talkabout rates, they're not allowed

(18:58):
to set rates, they are notallowed to collude on that level
.
They're not a conference right.
So that was a previousstructure of the shipping
industry.
But in 1998, a major overhaulof a deregulation happened and
conferences went away.
They were essentially likemembership clubs you had to pay
dues and the conference setrates.
We don't have that anymore, butthese alliances are more

(19:19):
operational and more vesselsharing and nowhere near where
they're not supposed to be ratedetermining and I've seen that
to be true.
So how many alliances are outthere and whose where?
So currently, as of today,there are three alliances.
And so we have the OceanAlliance, which is Costco, which

(19:42):
includes OECL, cmacgm andEvergreen Line.
We have 2M, which is MeriskinMSC, which has announced it
announced last year that they'llbe concluding operations by
January 2025.
So they gave a two-year noticeon that.
And then we have the Alliance,the Alliance, which has
Hapagloid, one which is OceanNetwork Express, hyundai

(20:03):
Merchant Marine and Yang Ming.
So, like I said, as we know, 2mannounced the cessation of
their alliance January 2025.
And actually, with the GeminiCooperation Creation and
Announcement, it was said thatHapagloid would actually be
leaving the Alliance, theAlliance.
So let's get back to kind of thenuts and bolts here, right?
So how do these Alliance getfiled with the FMC?

(20:24):
How do they start?
What happens?
So Global Ocean Alliance hasenjoyed limited antitrust
immunity for members of theAlliance by filing an
application and filing theiragreement with the FMC and
allowing 45 days to pass, sowhile during that time it's
actually obviously beingreviewed by the FMC.
But 45 days, that's it.
That's as long as the reviewhappens here.

(20:46):
So in that time the FMC can askquestions that will toll or
stop the clock so thatultimately might extend these 45
days, but they can'tindefinitely stop the clock,
amounting to a denial.
And most shockingly and I coverthis every once in a while and I
don't think people payattention or know that this is
true in enough, people don'treally get this the FMC does not

(21:12):
have the authority to denyapplications as they are
approved, so to speak, by theFMC during this 45 day period.
So let me say that again, theFMC does not have the authority
to deny these Allianceagreements when they're filed
and they're not approved by the45, if the 45 days passes, they

(21:36):
go into effect.
They're not necessarilyapproved and they're not
necessarily well, they can't bedenied.
So in order to stop an Allianceright, like how do you stop an
Alliance If the FMC doesn't havethe authority to stop it by a
denial?
How does the FMC stop it ifit's going to be monopolistic
and kind of a bad thing for theoverall industry, and by bad I

(21:59):
mean like a gross overmonopolistic control of the
industry?
So in order to stop an Allianceagreement, the FMC is required
to bring a suit against theAlliance application with proof
of why it should not be allowed,and that's their way of denying
the application.
They have to bring a lawsuitagainst the Alliance or the

(22:20):
agreement, and it's not justthis Alliance but they have to.
That's how they have to stopany of this stuff.
They have to bring a lawsuitagainst it.
So this needs to happen within45 days of filing, otherwise
after 45 days it goes intoeffect.
Right?
So that's one piece.
We're not gonna talk much aboutthat, but I always like to
bring that up, that the FMCcan't deny it.
We talk about oh well, is theFMC gonna deny this agreement?

(22:42):
You'll see that sometimes inthe media.
They can't.
They can't deny it.
They can ask questions and theycan file an injunction as their
way of denying, which is apretty big hurdle.
But going back to kind of someof the nuts and bolts, so why
would an agreement?
Why wouldn't Alliance actuallywant an agreement filed anyways?
Right, so they want the.

(23:04):
These agreements are filedbecause of the limited antitrust
immunity.
So what does that mean?
Limited antitrust immunity?
So if the combining of theoperational terms or vessels or
any of this stuff amounted to anotherwise monopolistic activity
, then their agreement being onfile with the FMC provides them
with limited antitrust immunity.

(23:24):
So limited immunity from anotherwise monopolistic activity,
right?
Or said another way, anotherantitrust behavior.
So they're filing with the FMCto kind of protect against,
potentially, department ofJustice or somebody going
against using generalmonopolistic regulations and

(23:44):
laws and statutes that theymight otherwise be a foul of,
potentially be a foul of.
So, as a general statement,this has actually roughly been
the same in Europe and that waswith the consortia block
exemption regulation.
It also provided limitedantitrust immunity, although
this isn't like an apples toapples comparison, but we won't
get into the differences, we'rereally just kind of trying to

(24:05):
overview this and make sure thatwe're all on the same page.
So the alliances filed with theFMC let's get back to the FMC
side of things what are thoseterms of expiration?
So in general they're notrequired to have an expiration
date or even a reapplication oftheir agreement date.
So they file their agreement,the 45 days pass and that's the

(24:29):
agreement.
They don't really have to be.
They're going to beconsistently monitored by the
FMC, consistently andcontinuously monitored by the
FMC.
But there's no re-reviewalperiod, there's no renewal, none
of that yet and I say yetbecause it's kind of a newer
thing all of these alliancesanyways within the past less

(24:53):
than 15 years really.
So they're not required to havean expiration date or
reapplication or renewal.
So they are still subject tostringent monitoring.
Like I said, they just don'tneed to reapply after a certain
number of years.
So Chairman Maffei actually oncesaid on record at a US Senate
Commerce Committee executivesession I think it was August
2022, I think that he said theywould actually welcome an

(25:15):
expiration period if that wereto be created by Congress.
And that was during the time,remember August 2022.
So that was over the summer,when Osreau 22 had just been
passed right, it was when it toaffect June 16th of 2022.
So it was right around thatsame time.
So Congress kind of mullingabout trying to decide how can
we help ocean shipping and theglobal movement of goods so that

(25:40):
was one of the things that cameup.
Was that?
Look, chairman Maffei of theFMC said he'd welcome an
expiration period if that wereto be created.
So what are some of the actualexpiration terms as defined in
the actual agreement?
So, like I said, there's norequirement for an expiration or
really any of the specificterms, but the agreements do
have some expiration language inthem.

(26:00):
And this has been kind of theinteresting piece to watch as
the shuffles are starting.
And this is where I need tohave the caveat.
I have not double checked thisthis week.
The agreement itself, so howagreements in the agreements
library works is that you'llhave the agreement initially
filed and then any amendmentsare then kind of stacked on top,
so you still have the initiallanguage, but then if there were

(26:22):
any amendments filed, you kindof have to cross-reference that
because obviously that wouldtake precedence for the most
part or it would be newer intime.
So again, none of this is legaladvice.
This is just kind ofeducational purposes, but for
the most part that's kind of howthat works.
So with the agreements librarydown this week, I can't check to

(26:42):
make sure that there were noamendments made for terms of
expiration, but I hadn't seenthem in the last few weeks.
So here's the expiration termsas they were kind of listed in
the original agreement for thesethree different alliances.
So 2M Alliance expiration ithad a 10-year term of the

(27:03):
agreement with two years noticefor leaving the agreement, but
they can't submit that beforeeight years had passed.
So that actually put usperfectly at 2025.
And that's what we're expecting, right?
So they gave two years ofnotice and it was at least eight
years since the initialagreement had happened.
It gets a little technical, butgo back and look up these

(27:24):
agreements if you want to seethe actual specific language
here.
The Ocean Alliance Agreementexpiration.
So they had a preliminary10-year term where nobody was
allowed to leave the alliance,and then after March 2027,
originally that was five years,but then it was amended to
reflect 10 years.
So after March 2027, a partycould leave as long as they gave
12 months notice.
Then after 2027, if nobody left, then the term was extended

(27:48):
indefinitely with the 12-monthnotice still in place.
So that's what's up on theOcean Alliance.
Again, that can be amendedthrough an amendment filed to
the FMC, but right now it lookslike March 2027 is kind of that
threshold year.
So the Alliance expiration, theAlliance and this is the

(28:08):
interesting one, because this iswhere Hoppeg Lloyd is moving.
So last I checked or moving outof, I should say so last I
checked the Alliance THE had a13-year term with the right to
withdraw on a 12-month notice,but not before the initial
period, april 1, 2030.
So it's obviously 2024.
So look, the FMC agreementslibrary has been down.

(28:30):
I can't say that enough, sotake this with a grain of salt.
This is potentially outdatedinformation, so I haven't been
able to confirm whether anamendment has been filed.
And remember, they can amendthese if they want, because the
types of terms or specifics ofthe terms are not mandated by
the FMC.
Rather, the filing of thisagreement or these agreements
for the limited antitrustimmunity is why they're really

(28:53):
filed for the most part.
But this is a littleinteresting though, because
technically, if I'm reading thisright and if an amendment
hasn't been filed, hoppeg Lloydis leaving before that 2030
threshold, but they are givingthe 12-month notice.
Again, these are all agreementsthat are made within these
alliances, so it's justinteresting.

(29:15):
I'd like to look into this alittle bit more, but that's kind
of.
I wanted to let you know whereI was thinking.
I think that they'll probablyremedy this just fine, but yeah,
it'll be interesting to pullthat agreement and see what the
leave, the agreement terms are.
And so 12-month notice iscertainly what's been given here

(29:37):
if they intend to start theGemini cooperation February 2025
, now being January 2024.
I mean, that's at least 12months.
I should also note that some ofthe expiration notices also
have provisions for exceptionsand it's possible that Hoppeg
leaving might be covered underone of those exceptions as well.

(29:59):
Some of these exceptions, fromwhat I remember, were insolvency
, bankruptcy and material changein company status.
So perhaps Hoppeg Lloyd iscovered under one of those
exceptions or one of the otherexceptions listed in the
agreement as it's filed with theFMC Agreements Library.
So that's what kind ofalliances are generally the

(30:19):
three that we have on file rightnow?
So what is this Geminicooperation?
Like I said last week, thisseems to suggest that it is
potentially a new global oceanalliance, but I haven't seen the
agreement filed with the FMC.
As you know, agreements arekept in the agreements library.
I can't say that enough.
I just want you to be able tohave the tools to go check all

(30:39):
this yourself.
It's, it's down right now and?
But look, maybe maybe theydon't need to, maybe they don't
need to file a limited trust,maybe they don't need the
limited trust antitrust immunityhere I'm sorry, I'm kind of
tripping over this.
They file the agreements, likeI said, because they are then

(31:00):
afforded limited antitrustimmunity because potentially and
otherwise possibly Epileisticthing this, this working
together using the same vesselsis given this limited antitrust
immunity by filing the agreementwith the FMC for the FMC to
review, under Continuous review,review.
So maybe they don't need itright.

(31:23):
So maybe they don't think theircooperation is going to be
coming anywhere near anantitrust concern for market
share, I mean, usually that'stypically like a 20 or 30
percent market share threshold,and I'm going to talk about this
a little bit in the context ofthe EU consortia block exemption
.
So Hold that thought for aminute.
Let's do a quick refresher.
What is the consortia blockexemption regulation?

(31:44):
This is from the EUCommission's website.
So the consortia blockexemption regulation Liner
shipping services comprise theprovision of regular scheduled
non bulk maritime cargotransport, the vast majority in
containers, on a specific route.
They require significant levelsof investment and therefore are
regularly provided by severalshipping companies cooperating

(32:05):
in consortia.
So I should note, consortia isroughly the equivalent of
alliances, right?
So just a different name in theEuropean Union context.
For our purposes we're going tobe kind of consortia equals
alliance for the most part.
So, continuing on on theEuropean Union Commission's
website, consortia representagreements between liner
shipping companies, carriers, onjoint operation of services,

(32:27):
which generally lead toeconomies of scale and better
utilization of the space of thevessels I've talked about many
times.
I think you also get betterrouting with some of these
alliances and consortia.
Continuing on from the website,the CBR the consortia block
exemption regulation adopted in2009.
So again, remember that waskind of right around that time
that all of the alliances werethinking about being adopted and

(32:50):
it was a rough time for oceancarriers.
We they were.
We've done a whole kind ofreview of what happened when
Hanjin went bankrupt.
Go check that episode out.
It was pretty interesting tosee the timelines of what
happened there.
But so, continuing off thewebsite here so the block
exemption regulation adopted in2009 Exempts consortia from the
prohibition of article 101, subone of the treaty of the

(33:13):
functioning of the EuropeanUnion, provided certain
conditions are met.
Those conditions are one,consortia may not contain
hardcore restrictions,price-fixing, capacity or sales
limitations, except capacityadjustments in response to
fluctuations in supply anddemand, allocations of markets
or customers.
That's the first, the firstcondition.
The second condition is themarket shares of consortia may

(33:34):
not exceed 30%.
Right, I've often said it, I'veheard it to be about a 20 to 30
percent.
That that's reported on thosethresholds.
This for the European Union is30 percent.
And the third condition hereUnder the treaty on the
functioning of the EuropeanUnion, that this block exemption
is Exempting is that consortiamust give members the right to

(33:56):
withdraw with a minimum, amaximum period of notice of six
months, 12 months in case ofhighly integrated consortia.
We're gonna come back to that.
Last year we talked about theEuropean Union deciding to allow
their consortia block exemptionregulation to expire in April
2024 and at that time there wasa lot of reaction in the
industry, but one reaction thatstood out to me was that of

(34:18):
perhaps most of the global oceanAlliance agreements didn't even
need antitrust immunity orantitrust protection from these
block exemptions.
So certainly that's why thefact sheet explaining the block
exemption repeal said and thisis again from the European Union
Commission website theCommission.
So why is the Commission decidenot to extend the CBER that the

(34:40):
the block exemption?
The Commission does not putinto question the potential
benefits of cooperation betweencarriers to jointly operate line
or shipping services.
Nor has the Commission changedits mind that consortia may be
an efficient way for providingan improving line or shipping
services that also benefitscustomers.
However, since the blockexemption Regulation was adapted
in 2009, market developments inthe liner shipping sector have

(35:03):
shown that a dedicated blockexemption regulation is no
longer fit for purpose.
Overall, the evidence collectedfrom the relevant stakeholders
and market participants pointstoward the low or limited
effectiveness and efficiency ofthe block exemption throughout
the 2020 to 2023 period.
I noted at the time, right thatperiod, that they chose 2020 to

(35:23):
2023.
That was an anomaly of Threeyears, but they use those three
years to determine that thisrepealing of this block
exemption was appropriate.
This third part is theinteresting part here.
Reading again from the website,given the small number and
profile of consortia fallingwithin the scope of the block
exemption, the block exemptionbrings limited compliance cost

(35:47):
savings to carriers and plays asubordinate role in carries
decisions to enter intoconsortium, we're saying not
many of these agreementsactually fall within this block
exemption.
Such with the European Union issaying not many agreements fell
in the exemption anyway.
So perhaps the block exemptionmight be redundant or
unnecessary and that was partlywhy they Determined to not renew
it.
It wasn't that they repealed it, but they determined not to

(36:08):
renew it.
So the expiration of the blockexemption reading off the
website does not mean theconsortia are prohibited in the
European Union.
It simply means that they aresubject to the EU antitrust
rules that apply to all economicsectors.
So this was an exceptionproviding for that limited
antitrust immunity, and that wasthe European Union.

(36:31):
So now, coming back to kind ofthat, that thought maybe we
won't see a Gemini cooperationagreement filed.
Maybe the limited shipsdedicated to the cooperation
Keeps it well below anyantitrust monopoly threshold
concerns.
I don't know, I'm just kind ofthinking out loud here, I guess,
but I'm just thinking about the.
I'm just kind of thinking outloud here, I guess, but I'm
curious and I thought that youmight be too.
Maybe, maybe this will be thenext round of alliances, will be

(36:58):
, they're not concerned or theydon't need that limited
antitrust immunity.
And and I certainly don't know,and and Just just a thought, I
don't know maybe the alliance,maybe the agreements on its way,
maybe it's already there, maybeit's because the agreements
library is down, that that Idon't see it.
So, pulling from thehoppeg-loid website,
announcement though With mares,the new cooperation between

(37:21):
hoppeg-loid and mares willcomprise a fleet pool of around
290 vessels and a combinedcapacity of 3.4 million
containers.
Okay, so, like I said, with thekind of let's, let's pivot back
to the expiration piece, right?
So, hoppegloy leaving theAlliance, the Alliance that,
like I said, they are giving 12months notice, as is otherwise

(37:43):
stated in their agreement, fornotice of departure, despite
that initial 2030 can't leaveperiod.
But again, I wanted to checkthat with the agreements and
with the agreements librarybeing down, I couldn't see if
there were subsequent amendmentsand I didn't want to go too far
down.
But they're complying withtheir own terms of this 12 month
notice.

(38:03):
It also says as consents ofjoining the cooperation so
Hoppegloy will leave theAlliance at the end of January
2025.
Right, that's what we'retalking about.
So that's the 12 month notice.
Recall.
One of the conditions from theblock exemption is that there
must be 12 months in case ofhighly integrated consortia
giving notice to their membersto write to withdraw.

(38:25):
So they're also complying withthe block exemption which is
still in effect until April.
April 2024 is when that blockexemption will expire, but
they're still complying withthose terms.
So I think that maybe they'resimply going to be amending
their FMC agreement to allow forthe early departure before 2030

(38:46):
, if that is what it still is.
At least it was previouslymentioned in their agreement,
like I said, and then MeriskinMSC.
They had a two year expirationterm and they have certainly
given those two years of noticefor their Alliance cessation.
So that was the two M Alliancethat's going to be concluding in

(39:06):
January 2025.
I said this last week but whentwo M announced their breakup it
was anticipated that there maybe some follow on, shifts to the
other alliances and, like I'vesaid a bunch today, the
agreement members are notnecessarily beholden to their
agreements unfilled with the FMCforever.
They need to comply with theiragreements as they've put on

(39:26):
file, but they can file theseamendments.
That's what I mean.
They can submit addendums andamendments that modify the
agreements, that change some oftheir terms.
So certainly the ability toleave an agreement is one of
those things that could changeif it hasn't already been filed
as an amendment.
Like I keep saying, they madethe terms of their agreements
and so long as they submitamendments and do course they

(39:48):
can do just that there reallyisn't specific regulatory
requirements on the context ofthose agreements.
I mean, I guess the thing isthere could still be an
injunction filed against anamendment, like I believe it
still falls under those 45 daysof a filing with the FMC.
But look, regardless of all thespecifics, I don't want to go

(40:10):
too far.
We've already been talkingabout this for quite a while.
This is for sure a maritimeprofessor type educational
training today.
And I shouldn't say trainingbut overview, educational
overview.
I wanted to give a briefoverview of the alliances as we
see them, kind of in what'sgoing to be happening in the
next few months, what's going tobe happening in the next 12

(40:32):
months, certainly what's goingto be happening before the
change happens in April.
Are we going to be seeing anychanges or movements among the
other alliances?
We still might see somemovement of the other alliances,
both in the Alliance, theAlliance and the Ocean Alliance,
despite those kind of can'tmove members until this time.
I'll keep watching theamendments.

(40:55):
I find it pretty interesting tosee the different movements
here and the differentpartnerships.
So if you or your company wouldlike an overview training on
global alliances or some otherglobal ocean shipping topic,
look you're in luck.
I do offer these trainings andwebinars through my company, the
Maritime Professor, and I amcurrently booking out for early
summer.
I just wanted to mention thatbecause I've gotten a lot of

(41:16):
questions about ocean alliancesgenerally and kind of the basic
parameters around them.
So, as always, the guidancehere is general for educational
purposes.
It should not be construed bylegal advice directly related to
your matter.
You need an attorney.
Contact an attorney.
But if you do have specificlegal questions, feel free to
reach out to my legal company,skoll Strategies.
Otherwise, for the non-legalquestions, the e-learning and

(41:38):
general industry information andinsights, come find me at the
Maritime Professor.
If you like these videos, let meknow, comment, like and share.
If you want to listen to theseepisodes on demand, or if you
missed any previous episodes,check out the podcast by Land
and by Sea.
If you prefer to see the video,they live on my YouTube page by
Land and by Sea, presented bythe Maritime Professor.
And, while you're at it, checkout the website
MaritimeProfessor.
com.
So until next week.

(41:59):
This is Lauren Beagen, theMaritime Professor, and you've
just listened to by Land and bySea.
See you next time.
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