S3.E19 - Gemini Cooperation Agreement filed w FMC // USTR Sec 301 Tariffs // MTDI RFI#2 due today

Topic of the Week (6/14/24):

Let's break down the Gemini Cooperation Agreement that was JUST filed with the FMC...

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 Strategiesᵀᴹ)

Let's dive in...

1 - Federal Maritime Commission Maritime Transportation Data Initiative (MTDI) Request for Information (RFI) #2 is due today. 

https://www.regulations.gov/docket/FMC-2023-0016/document

2 - INTERNATIONAL LONGSHOREMENS ASSOCIATION (ILA) and UNITED STATES MARITIME ALLIANCE LIMITED (USMX) have suspended negotiations. The ILA released a statement with some fiery language. 

JOC coverage:
https://www.joc.com/article/ila-links-contract-wage-proposal-ocean-carriers-financial-results_20240613.html 

3 - United States Trade Representative Section 301 Investigations:

🔹steelworkers petition proposing a US port call fee on Chinese built ships
🔹4-yr review of China tariffs proposes adding 25% tariff on ship to shore cranes to go into effect Aug 1

-------------------------------

The Maritime Professorᵀᴹ is an e-learning/educational based company on all things maritime and supply chain - we provide employee trainings, e-content/e-courses, general trainings/webinars, and executive recruiting. Make sure to sign up for the email list so that you will be alerted to when the e-learning content is available, but also, being on the email list will give you exclusive access to promo/discount codes!

Sign up for our email list at https://lnkd.in/eqfZJShQ

Look for our podcast episodes - NOW AVAILABLE:

https://lnkd.in/g4YUbxjs

** As always the guidance here is general and for educational purposes only, it should not be construed to be legal advice and there is no attorney-client privilege created by this video or podcast. If you need an attorney, contact an attorney. **

#ByLandAndBySea

Transcript

Speaker 1: 0:00

oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh. I got soul coming through. Won't stop in the peace and, on top of the world, can't walk to the beat when you see me coming next to you. Everywhere I go, I'm in the spotlight. This is a good life. I'm living bold. This is what it looks like. I'm a ticket out of the world.

Speaker 1: 0:55

Gemini cooperation agreement has been filed with the Federal Maritime Commission. This will be the newest vessel sharing agreement to hit the market and I'll say though, interestingly, this isn't being categorized as a global vessel sharing alliance in the FMC's agreements library, simply a vessel sharing agreement. We'll talk more about what's in the filed agreement, so stick around. Hi, welcome to by Land and by Scene, an attorney breaking down the weakened supply chain Presented by the Maritime Professor me. I'm Lauren Began, founder of Maritime Professor and Squall Strategies, and I'm your favorite maritime attorney. Join me every week as we walk through both ocean transport and surface transport topics in the wild world of supply chain. As always, the guidance here is general and for educational purposes only. It should not be considered to be legal advice and there is no attorney-client privilege created by this video or this podcast. If you need an attorney, contact an attorney.

Speaker 1: 1:52

So before we get into the discussion of the day, let's go through my top three stories of the week. All right, we have a jam-packed top three stories of the week. So the first one is the MTDI, the Maritime Transportation Data Initiative. Request for information. Number two the comments are due today. We talked about this a little bit last week. I'm going to be watching regulationsgov comment section and letting you know when, when, what comes from the feedback right, what, what comments are submitted. But just a reminder if you haven't submitted, today is the day.

Speaker 1: 2:23

This is the Maritime Transportation Data Initiative. We talked, like I said, a little bit about this last week with FMC Commissioner Carl Benzel. He's been working on this, but just as a little bit of a briefer, so that we're all on the same page. So Commissioner Benzel undertook this project in December of 2021. 21. He began holding meetings with maritime and intermodal stakeholders. These were one-hour meetings that were held roughly every week and they ran from December 2021 to June 2022. And they culminated with a data summit.

Speaker 1: 2:55

So in this effort called the Maritime Transportation Data Initiative, commissioner Carl Bensel focused on the data initiative under three key objectives it was cataloging the status quo in maritime data elements, metrics, transmissions and access. It was identifying key gaps in data definitions, classification and it was developing recommendations for common data standards and access policies and protocols. So all of those meetings were held virtually and they are recorded and available on the FMC's YouTube channel. In those meetings Commissioner Bensel spoke with all sorts of people from the state, from stakeholders, from the industry. He talked with OTIs, so freight forwarders and NBOCCs. He talked with ocean carriers. He talked with large aggregates. He talked with standards bodies. He talked with maritime labor. He talked with technology platforms, other US government agencies, mtos. You get the idea. He covered a lot of ground with this initiative. So now what we're seeing is now we're having requests for additional information. Through those initiatives, through all those weekly meetings, he created a report that came up with some kind of summaries and ideas and aggregating some of the discussions that they had been working on.

Speaker 1: 4:02

But since he has released two requests for information, which is trying to dive into a little bit more of the specifics of some of the things that he's discovering in his initiative. So in RFI number one he broke them down into two different categories. It was transportation, service providers, and importers and exporters. Excuse me, that's for RFI number two. For RFI number one he also broke it down, but for RFI number two the one that's currently open and closing today he had transportation, he had vessel operators and marine terminal operators as one category and he had importers as the other category and exporters as another. And basically in this RFI number two he wanted to look at some of the specifics of data dissemination and diving into some more tricky areas. So there's some questions about early return date in here. But then he also has a catch-all for any metrics or pieces of information that are not clearly defined or missing entirely from the maritime supply chain, of information that are not clearly defined or missing entirely from the maritime supply chain.

Speaker 1: 5:10

I'm going to be watching these comments filed pretty interestingly. I think that this whole initiative is really interesting. We talked about that, like I said, last week with Commissioner Bensel. In that discussion, one of the things that I raised is just the existence of this MTDI. This Maritime Transportation Data Initiative, has been, I would say, a success because he's created the conversation where, prior to this MTDI and maybe it was just happening, but I think that he created this In this MTDI discussion it created a larger conversation around data and the cataloging of data and the dissemination of data, and I really think that Commissioner Bensel should be commended for his efforts on doing this. I think that this has been a great thing. I've been loving to see the engagement with the industry and I think that this is just a really interesting initiative.

Speaker 1: 5:58

So, reminder again today is the last day to file comments. However, last time he accepted late filed comments. I can imagine that that might happen again. Who knows for sure? But I can imagine that that might happen again, because what he's really looking for here is engagement with the industry. Right, he wants to have these questions answered, because he wants to learn more from the industry on how, what's going on out there, and so how better to do that than have that engagement? And so, while he needs to be timely with the comments coming in, I can imagine, in the interest of the continued conversation, he'll probably accept the late file comments. I don't know that for sure. I don't know that for sure. So get them in today, if you can.

Speaker 1: 6:40

All right, story number two so this week the ILA, the International Longshoremen's Association, released a statement saying that they were suspending negotiations with the US Maritime Alliance. So this is the labor negotiation that's happening on the East Coast and Gulf, the maritime labor discussion. It's the International Longshoremen's Association and the US Maritime Alliance. This is the labor discussion that is expiring September 30th. It has previously been said by the ILA that they would not work past a September 30th expiration, but it seemed like things were going pretty good, right? They said that the regional agreements were closing up by May. What was it? May 17th, I believe it was.

Speaker 1: 7:21

It seemed like it was going pretty good, but this week the ILA released a statement saying that they were suspending the negotiations, and in the statement there were some pretty fiery things said which, look I don't want to overdramatize this I still think that this is a hiccup. I think that this is not a complete annihilation of all the negotiations here, but I don't know, right, I'm not on the inside of the negotiation. I think that there are a lot of things at play, but I did want to read some of the comments and some of the things that were put in that statement, just so that you know some of the language that was coming out of the ILA, just so that you know some of the language that was coming out of the ILA. So ILA President Harold Daggett said there's no point in trying to negotiate a new agreement with USMX, that's US Maritime Alliance, when one of its major companies continues to violate our current agreement with the sole aim of eliminating ILA jobs through automation. So that's always the concern, right, is that the ILA it doesn't want to see robots replace humans. It's essentially it boils down to that right but basically they don't want to see automation. Take ILA human jobs and US Maritime Alliance. I don't think that they're necessarily trying to push for all this automation, but they're trying to streamline and expedite some of these systems, and so automation is one of those things. So it says in this statement. It also says the ILA will not meet with USMX until the auto gate issue is resolved.

Speaker 1: 8:54

Additionally, the union is still waiting on results from an audit for jobs created out of new technology, a report that they have been anticipating for almost two contract periods. The ILA has observed an increasing number of IT personnel on marine terminals, with concerns that APM and Marist's IT departments in Charlotte, north Carolina are encroaching on their jurisdiction. He said the ILA is not taking this lightly and the ILA is monitoring and keenly aware of APM terminals and Marist Line's repeated attempts to circumvent ILA master contract and cut ILA jobs through the introduction of automation and semi-automation equipment. I mean so they're stopping negotiations for now. They're suspending negotiations. They're pointing out specific concerns and specific problems that the ILA sees in some of the activity that's happening in some of the ports, in some of the terminals.

Speaker 1: 9:53

Look, there's a lot of time between now and September 30th and I'm only pausing because it's also an election year, right, and so that's something that's also playing into this, but there is a lot of time between now and September 30th. But look, in the announcement there was also some really fiery statements made. They quoted back to their annual convention, the ILA's annual convention last year, where they said who the heck they didn't say heck is a foreign company like Maersk to come onto American soil and build fully automated terminals. The ILA leader asked in a fiery speech to hundreds of ILA delegates at that July 2023 convention, continuing on in the. This is the post that ILA made, quoting their own comments at their own convention last year. So continuing on this foreign company, marist, tries to shove fully automated terminals down our throats. And for what reason? To eliminate good paying American jobs, ila jobs. So that's what the ILA said at the convention.

Speaker 1: 10:50

They also in this announcement, talking about the convention and talking about some of the things that were happening right now. They're saying the ILA leader expressed criticism of President Joe Biden and lawmakers for turning a blind eye to automation and its devastating effect on American workers. So then they quote President Daggett where he says how can this administration allow a foreign company like Maersk and other foreign shipping companies to get away with this? These were from the convention, right? So? So I only I'm restating some of the comments that he made because I mean these are, these are fiery things. Some of the comments that he made because I mean these are fiery things. But on the other hand, also consider when he said it, where he was saying this this is at their convention, right? So he was trying to rally the troops and obviously they are opposed to automation, very, very opposed to automation.

Speaker 1: 11:40

But this is I mean, this is the announcement that was released just this week hearkening back to that convention and some of those comments made. So you know, he also said we want an ironclad, we want ironclad language and the actual intent of the language in writing. He told ILA convention delegates last July, years after we signed a contract. Everyone seems to get amnesia, so they're also kind of expressing this concern that despite negotiated master contracts they still see a slippery slope of automation in the terminals. So what he does say here that I want to also before I I stopped repeating most of what he said here, but I was I want to also mention this part.

Speaker 1: 12:27

He said um, the uh, the relationship between, or the relationship with USMX is not as it appears. Um, and so that is just a little bit concerning because I think that the message, the media message, seemed to be that the ILA and the USMX were getting along for the most part, that they were moving forward, that things seemed pretty good. I think everybody always kind of holds their breath, but I think things seemed pretty good. But now they're saying the relationship with USMX is not as it appears, is not as it appears, and it just feels like they're taking a positional move against USMX and maybe digging their heels in, and you never like to see that right. Look, I thought that they were closer than they were with the regional agreements closing up by mid-May. It felt like they were well underway, right and, like I said from the get-go I don't want to over-dramatize this I think that there's probably a little political posturing here too.

Speaker 1: 13:24

There's a lot of calls for the administration to get involved and with that presidential election coming up, we'll see if the Biden administration engages, and maybe faster than they did with the ILWU discussion where they had the acting secretary of labor go in. This has always had a potential to get contentious because of all the different things going on. Because the ILWU just closed up their their negotiation last year and because the presidential election is coming up I mean we will see we could also see the Biden administration engage faster than the ILWU because perhaps they want the ILA vote or the endorsement. That might be something also at play here. That might be some of the calls to the Biden administration to get involved from the ILA. We'll see how this all goes, but I want to bring it to your attention. It certainly was was a hot topic this week was a hot topic this week, but it was a little bit to me it felt a little bit posturing. So which and no disrespect to certainly what the ILA is saying here, but with how strongly and fiery the language came out of this. I'm interested to see where this ultimately ends up, if it really is as contentious as it was purported to be by some of this strong language this week, or if this was just a hiccup. I'm still considering this to be just a hiccup. I think that they will come back together, hopefully sooner rather than later, right September 30th, all right.

Speaker 1: 14:53

Story number three, so this one. For this story, we're revisiting Section 301 tariffs at the United States Trade Representative's Office, ustr. We've talked about these before, but I wanted to bring them up because there were some very concerning things happening here that I really encourage people to start paying attention to. If you haven't been paying attention before, I really think that you should. This could potentially impact everybody in the supply chain that services the United States or works in the United States or is in the United States, even down to consumers. So okay, so what's happening?

Speaker 1: 15:26

So we have two different USTR Section 301s that we're looking at here. The first one is shipbuilding. This is the Steelworkers Petition. So Section 301, investigation of China's acts, policies and practices targeting the maritime, logistics and shipbuilding sectors for dominance. We talked about this as the Steelworkers Union petition. Right, this was the United Steel, paper and Forestry, rubber Manufacturing, energy Allied Industrial and Service Workers Industrial Union, the AFL-CIO, clc, the International Association of Machinists and Aerospace Workers, the International Brotherhood of Boilermakers, iron Shipbuilders, blacksmiths, forgers, aerospace Workers, the International Brotherhood of Boilermakers, iron Ship Builders, blacksmiths, forgers and Helpers, the International Brotherhood of Electrical Workers, and the Maritime Trades Department, afl-cio, filing their petition with the USTR on March 12, 2024. So I call this the Steelworkers Union. It's clearly a whole bunch more than that, but I call this the Steelworkers Union petition. So this petition is what we previously talked about. Right, this was filed March 12th 2024. This has to do with the shipbuilding and, like I said, the title is that China's acts, policies and practices targeting the maritime logistics and shipbuilding sectors. So one of the actions this is what I want you to pay attention to One of the actions proposed by the petition was a call to impose a port fee on Chinese-built vessels calling at US ports.

Speaker 1: 16:46

That's concerning to me. It was a call to impose a port fee on Chinese-built vessels calling at US ports. So what does the petition suggest as the remedy? Exactly what are they saying? So this is from the petition To obtain the elimination of China's acts, policies and practices to dominate global maritime trade and logistics. Ustr should impose a fee on every Chinese-built vessel that docks at the United States port. Every Chinese-built vessel that docks at a US port. Yes, that's potentially almost all of them out there, right? That's quite a few vessels.

Speaker 1: 17:21

They continue in the petition. It says the port fee should be based on the tonnage of the Chinese vessel docking in the United States, with larger and heavier ships that presumably benefit from greater government support, bearing a greater cost to dock in the United States. To create an incentive for China to eliminate its unfair practices, the fee should also take into account the age of the vessel, with the fees assessed on newer vessels being higher than the fee on older vessels. To the extent that China does not eliminate its interventions to support domestic shipbuilding and other reasonable practices unreasonable practices the fee should also be set to increase at regular intervals in order to provide a greater incentive to the government of China to discontinue such practices. So they're saying we should be imposing this port fee any Chinese built vessel that services a US port, based on how old it is, based on how long the activity of China doesn't change. They're saying basically, like this should be an increasing port fee and it should also be based on like the newer ones will be penalized more. So they also talk about the hypothetical number for the fee. Right, we're talking about a fee per vessel, calling it a US port. They said a hypothetical million dollar port fee on a 20,000 TEU cargo ship. So their justification is that, look a million, a hypothetical million dollar port fee on a 20,000 TEU cargo ship may only impose a cost of about $50 per container. So, look, I'm not exactly sure how this would. They're saying roughly look, spread out per container, it's going to be less, it's only $50 per container. I mean, that's if the vessel's totally loaded up and I don't know. This gets a little sticky and I don't love the idea of a million dollar or otherwise, right, increasing port fee for a US port for a Chinese built vessel.

Speaker 1: 19:14

And I was looking through some of the filed comments this USTR section 301 investigation. The comments have closed. So there was a hearing, there were open comments. The comments have closed. But I was looking through and I really like the explanation, trying to kind of why did I not like this US port fee as much as I don't know why was I having such a strong reaction? What am I trying to say here? I was looking through the comments.

Speaker 1: 19:38

The International Chamber of Shipping put together some pretty good comments that I tend to agree with and I'm just going to talk about it. I'm just going to read from it in talking about the US port fee. So this is from the International Chamber of Shipping. So they said not only would such a fee fail to disincentivize the policies and practices of China in the maritime sector, but it would damage US import and export market competitiveness, increase costs for US consumers and, in our view, fail to achieve the petitioner's stated aim of revitalizing US domestic shipbuilding capacity.

Speaker 1: 20:09

They continue in their filed comments imposing a fee cannot disincentivize Chinese acts, policies or practices. Leveraging a port fee on vessels built in China but which are often owned and operated outside of China and which call at US ports, cannot act to disincentivize Chinese subsidization of shipbuilding costs. Imposing a fee against vessels already produced and serving the US market will have no impact on the financing structure of Chinese shipyards, nor will imposing a fee on those vessels which are under construction but for which ship owners have already committed payment. Importantly, china's current shipyard order book accounts for 50% of the future global merchant fleet capacity, with 27% of the world's future LNG carriers, 50% of rover vessels, 61% of crude tankers, 56% of container ships and 70% of the world's future chemical tankers on order to be built in China. They continue on and say a port fee leveraged against the vessel to be built in China.

Speaker 1: 21:03

They continue on and say a port fee leveraged against the vessel which is already built or paid for in construction will at best fail to disincentivize Chinese acts, policies or practices of the petitioner's concern and at worst actively hinder the US market's access to vessel types vital to maintaining its energy and economic security. So that's what I also had concerns with right this port fee might disincentivize calling at US ports. I mean I don't see the direct connection because there isn't the ship building capacity in the US yet that these vessels that are built in China aren't still necessarily owned or operated by Chinese companies. And that was something that, continuing to look through the comments, the National Retail Federation posted comments by John Gold, so I'm going to read through their comments as well. I thought that they did a good job of kind of summarizing this. It said the petition alleges that Chinese subsidies to its shipbuilding industry are the cause of the lack of international competitiveness of the US shipbuilding industry. We believe there is no actual demonstration of that causal relationship offered as part of the petition.

Speaker 1: 22:14

One of the proposed remedies a fee imposed on all Chinese ships docking at US ports is in reality, a thinly veiled effort to create a pot of money to restore US shipbuilding subsidies Again. Notably, the petition offers no clues as to what level a port fee would generate the appropriate value of total subsidies to make the US industry internationally competitive. This petition, rife with gaping holes of key information, has now launched an investigation that threatens to upend US supply chains and foist still more unnecessary costs on American businesses, workers and family. They said right simply, stated NRF, in their filed comments, said a fee on Chinese ships docking at US ports is not sufficient to raise the money needed and will damage the US economy. And I tend to agree with that, because what they did say right is that they wanted to impose this fee so that they could start creating a fund for the revitalization of US shipbuilding. Possibly, but I really think that the unintended effect maybe it was intended, but probably unintended effect is that it is going to hurt supply chain, not just for imports but also for exports, right, you need a vessel calling at a US port in order to take the exports as well, and if we're dinging these vessels with fees, that could be problematic. So look, these are kind of my general thoughts. I'm certainly still looking into this. The comment period has closed for this, but I'm going to continue to watch this because, at least on first blush, this is what it seems like to me. It seems like this is a big problem that US port calls by happen-to-be Chinese-built vessels could be charged this fee.

Speaker 1: 23:59

The other USTR 301 issue that I want to bring up that is also very concerning to me is the ship to shore cranes, and so there is a second. This is not the same thing. There is a second USTR section 301 investigation going on. It can be a little confusing because, honestly, for a little bit I thought that they might've been the same thing too. They are two separate investigations. So there's the shipbuilding one with the US port calls. There's a different one which is shipped to shore cranes. This one is proposed modifications and machinery exclusion process in the Section 301 investigation.

Speaker 1: 24:34

China's acts, policies and practices relating to technology transfer, intellectual property and innovation. This is the second issue at USTR that I'm bringing up, and it's a proposed increase from 0% tariff to a 25% tariff on ship-to-shore cranes. So this is related to the Trump era Section 301 tariffs, and now they are undergoing their four-year review and so in this review so this is basically a continuation of the Trump era Section 301 China tariffs they were a major thing right in 2018, 2019, 2020. And so here it is, the four-year review of those China tariffs, the Section 301 tariffs, in that report. In this four-year report released by USTR, their findings were as follows the USTR said that they found that Section 301 actions have been effective in encouraging China to take steps toward eliminating some of its technology transfer-related acts, policies and practices and have reduced some of the exposure of US persons and businesses to these technology transfer-related acts, policies and practices.

Speaker 1: 25:37

They go on to say look, china has not eliminated many of its technology transfer related acts, policies and practices. Economic analyses generally find that the duties have had small negative effects on US aggregate economic welfare. Positive impacts on US production in the 10 sectors most directly affected some expansion here, and so, based on these findings, it said the USTR recommended to the president that Section 301 tariffs be covered. Uncovered products be maintained. To further encourage China to eliminate the investigated acts, policies and practices, the USTR recommended enhancing the effectiveness of the tariff actions by adding or increasing Section 301 tariffs on certain products. The listed products are a whole bunch of different things, right? I mean they are listing medical products, they're listing solar panels, electric vehicles, but they're also listing ship to shore. So, it said, taking into consideration the USTR's findings and recommendations, on May 14, 2024, the president issued a memo that directed the USTR to quote maintain, as appropriate and consistent with this memo, the ad valorem rates of duties and lists of products subject to the actions taken under the Section 301 investigation and to further encourage China to eliminate acts, policies and practices at issue and to counteract the burden or restriction of these acts, policies and practices. The trade rep shall modify the actions taken in the investigation to increase Section 301 ad valorem rates of duty for certain specified products of China. So they're saying, look, we're going to add some more.

Speaker 1: 27:06

This is currently open for public comments. This is open for public comments, and so USTR has said that they're inviting comments from interested persons with respect to the proposed modifications. Comments are due June 28, 2024. And what they are asking is not only about the ship to shore cream uh increase from a 0% to a 25% tariff. They're also asking about and I think that this is getting not enough coverage. They're also asking that commenters are invited to comment on the scope of the product description to cover ship-to-shore cranes under the subheading, which may include transporter cranes, gantry cranes and bridge cranes. And so that last one I want you to, that piece I want you to pay attention to in the currently open comment period currently open.

Speaker 1: 27:57

They are asking if they should expand or if they should cover these types of cranes in the shift to shore crane category to include those transporter cranes, gantry cranes and bridge cranes. This is a big deal because these tariffs, this 0% to 25%, is proposed to go into effect August 1st, august 1st. So really any port that has I mean, if they do expand it transporter cranes, gantry cranes or bridge cranes, in addition to these ship-to-shore cranes that are already being proposed, in addition to these ship-to-shore cranes that are already being proposed, ports may find themselves with an additional 25% tariff tacked on. Look, don't sit on this right. Usdr arguably isn't in the business of terminal operations, so that's why it's important for the industry to engage, right? We need to let them know that this is a big deal and could potentially have major impacts.

Speaker 1: 28:49

The intention here is to really counteract the Chinese dominance in the market. There's currently not really any alternatives for many of these cranes in the US, certainly for the ship-to-shore cranes, as I understand it right. So without options, this just becomes an additional cost for our own domestic ports that need these cranes, and if this goes into effect August 1st, this is a big deal because most of those cranes are already almost finished, if not, they are finished and they're just waiting for delivery. As I understand it, if they arrive at our shores on or after August 1st, they're subject to this 25% tariff, which I mean grains are not cheap, right, they could be tens of millions of dollars and 25% it's a couple million bucks. That was not anticipated in the. I can imagine that was not anticipated in the overall cost of these brains. So look, if nothing else, if this is going to impact you, I urge you to take a closer look. Talk with your attorneys, talk with whoever you need to talk with. This is not legal advice. I'm just general educational guidance and information. Take a look at these. This is concerning. Maybe submit comments if you think that this is going to affect you, because USTR needs to know.

Speaker 1: 30:00

This is on a list of things that have nothing to do with otherwise maritime operations, so they're putting it on. This was originally on the Trump era tariffs. It was totally eliminated from the list. Then, if you remember, ship to shore cranes were on the Trump era tariffs. It was totally eliminated from the list. Then, if you remember, ship-to-shore cranes were on the lists when the China tariffs of 2018 and all of that. They were totally eliminated from the list at that time in the Section 301s. It's back. And what the proposed product description says ship-to-shore gantry cranes configured as a high or low-profile steel superstructure and designed to unload intermodal containers from vessels with coupling devices for containers, including spreaders or twist locks. And now they're also saying this might be expanded. Or they want commenters to talk about transporter cranes, gantry cranes and bridge cranes. If this has any impact to you, take a look, because you might find yourself 25% tariff tacked on.

Speaker 1: 30:59

All right, let's get into the meat and potatoes of the day. Something a little bit lighter, something kind of fun to cover the Gemini Cooperation Agreement. So the Gemini Cooperation Agreement has been filed with the FMC. We've been waiting for this. You know I was talking. I didn't know if maybe they weren't going to file it, maybe they didn't want the limited antitrust, the limited antitrust protection that the Shipping Act provides. But it turns out they have filed this agreement with the FMC, so it's the Gemini cooperation agreement. The synopsis is the agreement authorizes the parties to share vessels in the trades between the United States, asia, the Middle East and Europe, and it was filed May 30th 2024. And the effective date, should nothing pause it or happen in the meantime, is set to be July 15th 2024.

Speaker 1: 31:52

So the Federal Maritime Commission posted a news release just the other day saying that they opened a 12-day comment period allowing interested members of the public to respond to Maersk and Hapag-Lloyd's newly filed vessel sharing agreement, the Gemini Cooperation Agreement. So the two parties right Maersk and Hapag-Lloyd FMC said instructions for submitting comments are included in the notice of agreements filed published in the Federal Register and the deadline for submitting those comments is Tuesday, june 18th. So you have next week. You have a good four calendar days from now, right. Today's the 14th. So comments are due June 18th. Comments submitted are confidential and subject to the exceptions noted there.

Speaker 1: 32:31

The agreement will allow Maersk and Hapag-Lloyd to globally coordinate their vessel operations. The parties propose operating under a structure whereby major ports of call will be served directly they're calling that the mainline network and other ports will be served by a shuttle service called the shuttle network. Activities conducted under agreements filed with the commission and in effect are not subject to federal antitrust laws. If the commission takes no action, the Gemini agreement will become effective on July 15, 2024. So this is that was reading off of the press release from the FMC. This we've talked about before in some of my Alliance 101 conversations on the podcast.

Speaker 1: 33:08

But the FMC can't necessarily deny agreements that are filed. They can file an injunction to stop them in the Federal Court of Appeals, the DC Circuit, but after 45 days the agreements just become effective. And that's what the FMC is saying here. If the commission takes no action, the Gemini Agreement will become effective on July 15th. So they don't approve it and they can't deny it. They can stop it, but only with this pretty big hill of filing an injunction against it, which I mean I can see both sides right. We've talked about that before. But having a big hurdle for a federal agency to stop industry movement and business movement hurdle for a federal agency to stop industry movement and business movement. Okay, but the other thing is that they also don't have the authority to deny it and they're the subject matter experts here.

Speaker 1: 34:00

So it said the Gemini cooperation agreement is available for public inspection in the commission's online agreements library and Maris and Hoppe-Gloyd are not currently parties to the same vessel sharing agreement. So, yes, you can go on to the FMC agreements library and see pretty much all of these vessel sharing agreements that are filed. The alliances certainly are on there, but now we're going to have the Gemini cooperation also there. So I wanted to take a look and see what was on there and we can talk about that today. So it said the agreement structure the agreement will operate using an approach whereby major ports of call are served by direct call of mainline services the mainline network and other ports are served by shuttle services the shuttle network. Initially, only one service in the shuttle network will call in the US, which shall be subject to review from time to time. So I'm going to skip around a little bit here because I'm just kind of picking out some of the interesting pieces that I thought were interesting.

Speaker 1: 34:51

Agreement authority of the mainline network. It said the parties are authorized and this is an agreement. So the language in this agreement was created by the two parties and agreed to by the two parties. So they're setting their own terms here and then it's filed with the FMC, as we know, and open for public comment right now. So agreement authority mainline network the parties are authorized to discuss and agree on the size, number and operational characteristics, including age and speed, of mainline network vessels to be operated here under and the number of vessels to be contributed by each party. Initially, the mainline network in the trade shall consist of approximately 123 vessels, with nominal capacities ranging from approximately 3,700 TEUs to approximately 16,000 TEUs. It says, without further amendment here too, the parties are authorized to operate up to 175 vessels on the mainline network in the trade, each with a capacity of 24,000 TEUs. So that's interesting. We've talked about that before.

Speaker 1: 35:48

These vessel sharing agreements and these alliances often get a bad rap. Certainly when they were coming into public purview in the 2020 and 2021 timeframe, people were saying oh, these are giant companies, how can they be in these alliances? These must be monopolistic. Well, this was part of the hinge that people weren't necessarily understanding is it's not their entire fleets that are assigned to or dedicated to these vessel sharing agreements, and that's why I want to point out this piece Right. They're saying the mainline network of the trade shall consist of approximately 123 vessels, going up to 175 vessels. That's not their entire fleets, or I would assume that that's not their entire fleets, or I would assume that that's not their entire fleets. It also says that the parties are authorized to discuss and agree upon the possible future development deployment of new buildings in the trade. The parties are authorized to discuss and agree on the ports of call, port rotation, itineraries, service speed and all other aspects of the structure and scheduling of the services to be operated, including the criteria and procedures for permanent and ad hoc schedule adjustments.

Speaker 1: 36:51

So I'm bringing all this up also to point out there's some specificity here and they're saying what they are agreeing, that they are allowed to do. So where the FMC comes in is they're reviewing this agreement as well and if there's any anti-competitive or monopolistic concerns, that would be something Anti-shipping Act, that would be something that the FMC could take to the Federal District Court of the Court of Appeals and enjoin or try to stop this agreement. But that would be, that would. That's where the FMC comes in, right, they can't just agree to anything and they can't just agree to monopolistic behavior, because it's not an all-encompassing or blanket antitrust under the Shipping Act you're not protected a full blanket. But the FMC if they're seeing problematic things here, or if the public sees problematic things that they submit to the FMC saying, look, you're not thinking of this? That's a reason why this might be enjoined. But I mean, I'm just letting you know some of the specificity that's also included in today in this agreement.

Speaker 1: 38:03

So Article 5B, under the agreement agreement authority, all vessels in the shuttle network. So it was the mainline network before and this is the shuttle network. They're saying all vessels in the shuttle network are going to be contributed by Maersk and that they may substitute vessels and they only need two weeks prior notice to Hoppag-Lloyd for those substitutions. And then they also say initially the shuttle network in the trade shall consist of one service of two vessels with nominal capacities of approximately 2,800 TEUs, without further amendment. Here too the shuttle network and the trade is authorized to operate up to three service vessels of up to three vessels each, each such vessel having a capacity of up to 5,000 TEUs. Those are all on the Marist side. So now it also says Hoppe-Gloyd shall have the option to time charter vessels to Marist for deployment in the shuttle network and Marist shall have the option to call for Hoppe-Gloyd to time charter vessels to Maersk for deployment in the shuttle network and Maersk shall have the option to call for Hoppe-Gloyd to time charter vessels to Maersk for deployment in the shuttle network. So they're saying Hoppe-Gloyd could put time charter vessels for the deployment in the shuttle network but right now as it kicks off it's only going to be Maersk vessels. So this next part I thought was interesting. With that knowledge right, with that understanding that Maersk is feeding the shuttle network, hapag-lloyd shall receive a slot allocation on the shuttle network as agreed by the parties, with the remainder of the space being for the use of Maersk, including subchargers by Maersk to third parties. Hapag-lloyd shall compensate Maersk for the use of slots on the shuttle network on such terms and conditions as the parties may agree from time to time. So Habeck-Lewitt is compensating Maersk for the use of these shuttle network vessels. I don't know, I just thought that that was an interesting piece because Maersk is only providing the vessels for the shuttle network. They also talk about blank sailings, which I thought was interesting.

Speaker 1: 40:10

Agreement authority miscellaneous. The parties are authorized to agree to blank or in other words it says skip sailings of the mainland network and or the shuttle network during Chinese New Year or Chinese Golden Week, provided such agreement is reached no later than 12 weeks prior to the scheduled date of sailing. So saying they can blank, they can blank sailings, but they have to give each other 12 weeks prior notice if they're going to do it during Chinese New Year or Chinese Golden Week. They also say parties are authorized to blank sailings of the mainline network or the shuttle network when vessel utilization is likely to fall below such thresholds as may be established by the parties from time to time. Any proposal to blank a sailing must be notified from one party to the other not less than six weeks prior to the scheduled departure of the sailing from the turnport for the relevant service. The other party shall respond to such proposal within three working days, provided, however, that a failure to respond shall not constitute consent for the blanking proposal. So they're saying look, as long as they give each other six weeks prior notice of a blanking, they can blank, and then they have three working days to respond. But if they don't respond they're not locked in and that's not acquiescing or consenting by not responding. I just think that's interesting, right, six-week notice or 12-week notice? I want to bring that to your attention.

Speaker 1: 41:27

Dissolution of the agreement. This is usually the part that we especially since 2M was dissolving that we've been watching on the different alliances. How do these alliance agreements dissolve? Notwithstanding anything contained elsewhere, either party shall have the right to terminate this agreement at any time, without financial or other penalty, by issuing no less than 12 months written notice of termination, provided that such notice may not be given before 36 months have elapsed, after February 1st 2025. So saying, look, you have three years from 2025 and then you have to give 12 months notice. So we're looking at a February 1st 2028 before either party can get out, and then, even so, they'll have to have a year's notice that we're looking at 2029.

Speaker 1: 42:11

It does say there are some other ways that they can terminate it. So it says Marist may terminate the agreement at any time by giving Hoppe-Lloyd six months written prior notice if APMT terminates the existing agreement between APMT and Hoppe-Lloyd and Hoppe-Lloyd may terminate this agreement at any time by giving Marist six months prior written notice if Hoppe-Lloyd terminates the APMT agreement. So it's just an interesting agreement I like going through. I like that the FMC has these on their agreements libraries that you can actually go through and see what the agreements that are being determined or agreed to in these vessel sharing agreements, right? The interesting part, like I said, is that this is not being categorized as a vessel sharing alliance or global alliance. It's just on the agreements library as a vessel sharing agreement. So no significance other than I mean it's been called an alliance, but this specific agreement seems to be the Gemini cooperation instead of being listed as the Gemini alliance. So I don't know.

Speaker 1: 43:14

I'm still waiting to see if that matters or if it's just a difference of words. So there's still time to submit comments if you feel so compelled. They are due on June 18th. But, as always, the guidance here is general, for educational purposes. It should not be contributed to legal advice directly related to your matter. You need an attorney, contact an attorney. But if you have specific legal questions, feel free to reach out to me at my legal company, squall Strategies. Otherwise, for the non-legal questions, the e-learning and general industry information and insights, come find me at the Maritime Professor.

Speaker 1: 43:43

If you like these videos, let me know, comment, like and share If you want to listen to these episodes on demand or, if you missed any previous episodes, check out the podcast by Land and by Sea, and if you prefer to see the video, they live in my YouTube page by Land and by Sea, presented by the Maritime Professor. While you're at it, check out the website MaritimeProfessorcom. So until next week. This is Lauren Began, the Maritime Professor and you just listened to by Land and by Sea. See you next time.