ECSA Supports Commission in Extension of Liner Consortia Block Exemption

The European Community Shipowners Associations (ECSA), the International Chamber of Shipping (ICS) and the World Shipping Council (WSC) have replied today to a public consultation launched by the Commission on its proposal to extend the period of application of the so-called liner consortia block exemption regulation (BER) by another five years.

“We very much welcome the fact that the Commission shares the shipowners’ view that the liner consortia BER should be extended” said Patrick Verhoeven, ECSA Secretary-General and added: “The reasons for maintaining the sector-specific BER are still valid today, especially when considering the many hurdles the shipping industry will have to cross. We must guarantee clear and efficient guidance to liner operators and avoid any legal uncertainty that the discontinuation of the block exemption would entail”

Since 1995, the Commission has adopted a series of consortia block exemption regulations, each effective for a period of five years. With the current BER expiring in April 2015, the Commission has launched a public consultation on its proposal seeking stakeholders’ views on extending its period of application by another five years, arguing that such an extension not only benefits carriers but also shippers.

ECSA, ICS and WSC fully share the Commission’s reasoning. Today’s liner industry has found itself in dire straits, battling with chronic overcapacity and high fuel costs, which have doubled between 2007 and 2013, and are expected to rise even further with the lower global fuel sulphur limit, dropping from 3.5% to 0.5% in 2020 or 2025. The situation is compounded by the fact that global demand remains anaemic.

The only choice carriers have under these gloomy prospects is to cut costs. Liner shipping has oriented itself towards economies of scale by ordering increasingly larger vessels, which can reduce per unit costs. However to take advantage of these economies of scale, ships have to be fully loaded, which under the current circumstances of tonnage oversupply can prove to be a tall order. Agreements and concerted practices between liner shipping in the framework of consortia can therefore alleviate the burdens the industry is has to bear.

“Discontinuing the block exemption for liner consortia would at this point and time constitute an unnecessary complication for the shipping industry, as the BER have so far had a good track record and are as useful to shippers as they are vital to carriers” said Patrick Verhoeven.

The joint ECSA/ICS/WSC submission

ECSA, March 31, 2014