Fault lines make unified voice for cargo groups elusive.
With the globalization of business and the bigger regulatory role being played by international bodies, such as the International Maritime Organization (IMO), there are some who feel shippers need a global voice as well.
Throw into the mix the effects of growing use of ultra-large containerships, slow steaming, the planned P3 Network of the world’s three largest container carriers Maersk,
Mediterranean Shipping Co. and CMA CGM and the unknown response by other carriers to the alliance, and the need for strong shipper advocacy may be greater than ever.
But the vision of trying to create a global organization to represent shippers is turning out to be difficult to achieve.
This summer, powerful shipper groups lined up on opposite sides of an IMO proposal requiring verification of container weights. The proposal was supported bythe Global Shippers’ Forum and its members, including the National Industrial Transportation League in the United States, but opposed by the Asia Shippers’ Council (ASC) and European Shippers’ Council (ESC).
And it follows disagreements between regional blocs on how best to organize. It’s unclear whether these disagreements will prevent the groups from effectively cooperating on other issues in the future.
Bruce Carlton, president of the NIT League and member of the GSF board, noted “the challenge for the GSF is to deal effectively with the enormous diversity of shippers. We do not have the luxury of organizing a group and speaking on behalf of a group in a single industry. If you’re in the paper products industry everyone is starting in the same place.
“Shippers across an A-to-Z spectrum of industries have a lot of views about a lot of things and they don’t always match up. To the extent that there has been some disagreement and controversy in this world of shippers, we think is to be expected, is normal,” he added.
And Carlton said GSF “is a start-up entity... getting our feet on the ground and working our way forward.”
Two-Decade Effort. Efforts by shipper groups to cooperate globally go back at least two decades when three groups—the NIT League, ESC, and Japan Shippers’ Council—formed the Tripartite Shippers’ Group in 1994 with the goal to dismantle liner carrier cartels.
In 2006, those three groups, joined by ASC and the Canadian Industrial Transportation Association (CITA), formed GSF. (As this issue of American Shipper went to press, CITA announced it is changing its name to the Freight Management Association of Canada.)
The power of shipper groups seemed to be in ascendency at that time, with the European Commission in 2006 adopting a measure to repeal the block exemption for liner shipping, a proposal that came into effect two years later.
The success the Europeans had in ending the block exemption led John Lu, ASC chairman, to call the ESC “our hero in the fight with the cartel.”
In 2009, the decision was made to incorporate GSF and seek formal recognition as a non-governmental organization.
Chris Welsh, who serves as GSF secretary general, in addition to being general manager of global and European policy at the Freight Transport Association (FTA) in the United Kingdom, said most GSF members agreed there was a need to “move GSF on from being a loose-knit network organization that met once a year to just share experiences, but with very little interaction during the year and coordination of policies and activities.”
At that time, GSF had no affiliation or accreditation to the main international transport organizations like IMO, International Civil Aviation Organization (ICAO), and World Customs Organization (WCO) that Welsh said “quite frankly make the rules for trade and set the regulations and rules for international transport.”
GSF members, he said, agreed FTA would create plans for making GSF an official non-governmental organization.
In 2010, GSF decided to move forward with plans to create a “properly managed organization with a board of directors, with a constitution, where members have voting rights and all the things you would expect from a democratic organization with corporate governance,” Welsh said. He said those steps are required to take if GSF wants to be represented at U.N. organizations, for example.
But ESC declined to join, saying the existing arrangements at GSF were satisfactory.
The following year, in 2011, FTA decided to leave ESC, a group that it had been part of since its founding in 1963. Welsh himself was ESC secretary general from 1996 to 2002.
Welsh said FTA decided to leave GSF in 2011, because it had its own Brussels office and after making a “hard-nosed evaluation” of what ESC could do for it decided it was better off remaining independent and continuing to have its own office in the de facto capital of the European Union.
“FTA has to look after its own members, and we have 14,000 members. We have that section within FTA that represents shippers, the British Shippers Council,” he said.
Welsh said FTA’s interest in GSF is motivated by representing those shippers at an international level.
“In an increasingly globalized economy, where we have either pan-European or genuinely global companies—manufacturers, retailers and so-on—those companies want effective influence at an international level,” he said.
Carlton said this is also one of the major attractions of GSF to the NIT League.
“If there are issues that have broad consensus across that spectrum of GSF players, then yes we’re going to try to be at IMO and ICAO and the World Customs Organization,” he said.
But Carlton noted, even so, GSF will have to be “very selective on the matters that we will engage in. We don’t have the means to be there every day.”
Lu of ASC said his group was initially “one of the keen founders” of GSF, feeling it and other shipper groups would be able to learn from older shipper associations in Europe and America.
Lu, who is also chairman of the Singapore National Shippers’ Council (SNSC), wrote in that group’s annual report that “As the issues impacting shippers have global implications, it is contingent on us to organize to be a formidable firepower” and highlighted its involvement in GSF.
He told American Shipper “We wanted the body to be very united, a platform for the shipper’s voice at a higher level.”
But Lu complained “in the middle of 2012, the GSF secretary general drafted a board paper on the GSF membership structure. Under the revision, shippers’ councils could join the GSF individually or through a regional body.”
Lu said this was a conflict of interest by GSF. He said it would give groups like the Singapore National Shippers Council the choice to “join the GSF directly or it could be party to the GSF through the ASC. Under the proposal, both the SNSC and the ASC would be accorded equal votes in the GSF.”
He said this meant GSF effectively, “altered its structure, from a regional shipper-centric to an individual shipper council-centric body; and undercut the importance of the regional councils.”
Lu explained this change was adopted by the four-member board, with NIT League, CITA, and FTA voting in favor of the change, and ASC opposing it.
“How can there be a simple majority vote? This was a decision that affected every member, the whole of Asia, it cannot be decided by a simple majority,” Lu complained. In a proposal on how GSF might be reformed he suggested that some issues might require approval by a two-thirds majority.
Lu said another sticking point was funding, adding when the group began, the four founding members—ASC, NIT League, CITA, and FTA—agreed to split start-up costs equally. Furthermore, he said ASC wanted to make their contribution not with cash, but by offering “in kind” services such as selling materials that GSF would produce.
Lu complained the funding structure was changed so that national members, such as FTA, NIT League and CITA, would pay a lower amount than ASC.
Welsh said these issues were still under discussion when Lu submitted his resignation, and had to be approved at the annual meeting of the GSF.
But he explained the goal was to arrange a membership that would meet the needs of both national and regional organizations. He said the fee structure was modified in April after discussions with the Union of African Shippers’ Council, which has since taken ASC’s place on the GSF board.
Welsh said as finally agreed upon, “membership arrangements are skewed specifically towards the regional organizations. So, for example, the fee structure has been designed to encourage and provide an incentive for those shippers’ organizations that wish to join and participate in the GSF as a bloc to make it cheaper for them than if they were a national organization.”
He said “there is a huge incentive” for countries to join GSF through their regional group because the fees are deliberately much lower than they would be if you just joined as a national member.”
He said the fee for a national group will be £1,200, while for a regional organization of up to 20 organizations the fee is £4,000 pounds that could be split among, for example, the members of ASC. ASC said on its Website it has 19 shippers’ councils from 17 countries.
While these fees may seem modest, Lu said many of his members are from poorer countries, incur considerable expenses traveling to meetings, and shippers’ councils in Asia tend to represent small and midsized shippers.
“Our structure is not the same as the Europeans or Americans,” he said.
Lu resigned from the GSF board in August 2012 and ASC left the body in November 2012.
Continued Disagreement. This fall Lu publicly made numerous criticisms of GSF, complaining it was “largely controlled by the Anglo-Saxons to serve their own interests and they are not likely to give up,” a comment that other members of the GSF found offensive.
He complained the United Kingdom’s FTA, in particular, had disproportionate influence on the group, because James Hookham, its managing director of policy and communications, serves on the board and Welsh is secretary general of GSF.
Lu said the group should “stay with its original mission — to provide a platform for shippers at international fora, governed by a core body of regional blocs of shippers’ councils/associations representing Africa, Americas, Asia and Europe,” with individual national shippers’ councils only being allowed to join if there is no council, as in South America where the Argentinian Shippers’ Council has joined GSF.
He said “Unless the GSF returns to its original position, it will not be possible for regional shippers’ councils, such as the ASC and the ESC, to rejoin the GSF.”
Lu questioned the ability of GSF being able to speak for global shippers, citing statistics from Alphaliner and J.P. Morgan that show the countries with current membership in GSF account for just 13.1 percent of world container trade, while Asian and European countries account for 58.6 percent and 15.3 percent, respectively. Asked about those figures, he said they represent exports from those countries and agreed other regions are receiving that cargo (and may be paying for the freight or arranging the shipments).
Paola Lancellotti, who became ESC secretary general after the group decided to leave GSF, was reluctant to comment on the historic relationship between the two organizations. But she said the decision to make the group a formal NGO was “forcing a situation where there were partners not ready and if there was a real intention and interest of the shippers to go united to have a strong voice you should create consensus, instead of division.”
This fall, ESC and ASC issued a joint statement opposing the IMO’s proposal for container weight verification, and Lancellotti said the two organizations are planning a series of discussions about what level of cooperation they might have going forward.
Meanwhile, Welsh said GSF continues to work with shippers’ councils in other parts of the world, including Australia and New Zealand. In addition to Argentina, he said GSF has been talking to other South American countries, including Peru, about becoming members.
While ESC and ASC have been highly critical of the IMO’s efforts to require container weight verification, Welsh argues that by being involved in the process GSF was able to influence the outcome and help make the regulations much more palatable for shippers.
Areas of focus for GSF have included cargo security regulations, efforts to introduce e-commerce into air cargo, efforts by international organizations to control climate change, and customs documentation.
GSF has also raised concerns over the proposed P3 Network by submitting detailed questions to the European Commission’s Competition Directorate in Brussels and asking for confirmation that it has launched a formal investigation of the proposed alliance.
Welsh said it has raised questions “on behalf of shippers from all over the world because they are rightly concerned about the market impact of the P3. The question on every shipper’s mind is — what will be the impact on my rates and the quality of services?”
Similarly, NIT League has asked the U.S. Federal Maritime Commission to examine the P3, saying “the extraordinary market reach and potentially enormous concentration of market share these three large carriers would hold in a number of trade lanes has already moved some analysts to conclude the P3 Alliance could have substantial pricing and service impacts on shippers,” though the organization noted analysts “have come to opposite conclusions on the direction of those impacts.”