Maritime Commission Approves Major New Carrier Alliance

By Mark Edward Nero

On Dec. 14, the Federal Maritime Commission announced that it has concluded its review of the proposed “THE Alliance” and is allowing it to go into effect as of Dec. 19.

The so-called “THE Alliance” is comprised of five different container shipping companies: Hapag-Lloyd; K Line; MOL; NYK; and Yang Ming. THE is an acronym for Transport High Efficiency.

Under the terms of the deal, “THE Alliance” members are permitted to share vessels, charter and exchange space on each other’s ships and enter cooperative working arrangements.

The scope of the agreement applies only to trade lanes between the United States and other nations. Cargo moved by carriers in “THE Alliance” that does not originate or terminate in the United States isn’t covered by this agreement.

Attorneys for “THE Alliance” submitted the application to establish the agreement to US authorities on Nov. 4, after which the Maritime Commission made no requests for additional information, thereby clearing the way for the agreement to come into force within the initial 45-day review period.

The Commission said its members’ vote to allow the agreement to become effective followed “a period of substantive and constructive discussion” with the parties.

“I am very cognizant of the concerns industry stakeholders had regarding provisions in this agreement, particularly those related to information sharing and joint procurement,” Federal Maritime Commission Chairman Mario Cordero said. “This office will continue to carefully focus on the impacts of the carrier alliance restructuring that is taking place in the shipping industry.”

Environmental Review Begins for Yang Ming Terminal

The Port of Los Angeles said Aug. 27 that its initiating the environmental review process on a proposed berth-improvement project at the port by Taiwanese marine transport company Yang Ming.

The start of the environmental process, which is expected to formally begin this fall, is the first step in Yang Ming's plan to enhance its terminal facilities and deepen its berth to accommodate 14,000-TEU vessels and increase cargo volume.

Executives from Yang Ming and the Port of LA signed a term sheet agreement in May to perform a number of key improvements expected to enhance the Yang Ming terminal facilities. As part of the agreement, the port plans to invest $122 million in improvements at the terminal, including construction of a new 1,260 linear foot wharf at Berths 126-129, dredging to a depth of minus 53 feet at the newly constructed wharf and expansion of the West Basin Intermodal Container Transfer Facility. The West Basin terminal is a partnership between Yang Ming, China Shipping and Ports America.

Yang Ming’s current lease at the West Basin Container Terminal ends in 2021, but this agreement will extend the lease to 2030, and is expected to deliver between $365 and $525 million in revenue to the port, depending on cargo volumes.

The $122 million enhancement of the Yang Ming terminal facilities is a component of LA’s five-year, $1.2 billion investment plan to update terminals, increase rail capacity and deepen its main channel.

Yang Ming Extends LA Terminal Lease

Marine transport company Yang Ming has agreed to extend its lease at the Port of Los Angeles for an additional nine years, the port revealed May 30. Yang Ming’s current lease at the West Basin Container Terminal ends in 2021; with this agreement, the lease is extended to 2030.

“I am happy this agreement will allow the largest, most modern ships to call at Yang Ming and provide cargo growth over the next 17 years,” Los Angeles Mayor Villaraigosa said. “The port is an economic driver for our region, and its success translates to jobs here in Los Angeles.”

The extension represents additional port revenues of between $365 and $525 million, depending on cargo volumes, according to the port.

In conjunction with the lease extension, Villaraigosa on May 28 signed a Memorandum of Understanding while in Beijing on a trade mission. The MOU provides for the expansion and modernization of the LA port’s Yang Ming terminal facilities. As part of the agreement, the port is required to invest $122 million in improvements at the terminal, including: construction of a new 1,260 linear foot wharf at Berths 126-129; the dredging to a depth of minus-53 feet at the newly constructed wharf; and expansion of the West Basin Intermodal Container Transfer Facility.

The West Basin Container Terminal is a partnership between Yang Ming, China Shipping and Ports America.

“This agreement and lease extension ensures that West Basin Container Terminals will increase its global competitiveness with expanded facilities to handle more cargo,” Port of LA Executive Director Geraldine Knatz said in a statement. “The Port had been making progress on these negotiations, but it was this trade mission and the Mayor’s leadership that closed this important deal.”

China is Los Angeles’ number one trading partner, representing 39.4 percent of LA’s total global trade numbers. In 2012, China’s total trade with the LA Customs District was over $159 billion, according to the City of Los Angeles.