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BIFA calls on UK Government to follow European Commission’s lead on CBER

Responding to the news that the European Commission has decided not to extend the Consortia Block Exemption Regulation (CBER), Steve Parker Director General of the British International Freight Association (BIFA) has suggested the UK follow suit.

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Commenting on yesterday’s development, Parker said:

“The sensible conclusion to the ongoing container market public consultation being conducted by the UK’s Competition and Markets Authority (CMA) would be to introduce an ombudsman to arbitrate on complaints as a minimum. Ideally, it would follow the EC’s lead and not retain the equivalent of a block exemption regime for the liner shipping industry in the UK, when the current one expires in April 2024.”

Parked added:

“BIFA, and its members, are not anti-shipping line. The association wants to ensure that there is a suitable balance between them as carriers, and our members as customers, points made during various meetings with the CMA. The EC has taken a sensible decision, and the UK government should follow suit to ensure that shipping lines in future will be subject to competition law.”

Meanwhile, various industry figures have offered their take on how the changes will impact shipping.

Writing on LinkedIn, Simon Heaney, Senior Manager for Container Research at Drewry, said:

“The big question now is whether the removal of the CBER will actually benefit shippers and generate more competition?

In Drewry Shipping Consultants Ltd’s view, this development is likely to backfire on shippers. Firstly, there was no compelling case that carriers abused market power during the pandemic. Such was the extraordinary impact of Covid on supply chains that freight rates would have soared with or without the CBER.

Secondly, the hoped-for increase in competition will be stymied by legal uncertainty and extra bureaucracy.

Removing the block exemption will not bar carriers from forming alliances and vessel sharing agreements, but they might not by willing to expose themselves to potential legal action.

Moreover, will smaller carriers be put off from participating in European markets with the greater administrative burden?

By effectively coercing lines to operate independently, the logical conclusion is that each carrier will have to downsize their service portfolios in terms of frequency and connectivity.

That would reduce, not increase, competition on a port-pair basis and push up freight rates.”

Hans-Henrik Nielsen, Global Development Director at UAE-based transport company CargoGulf Inc, also took to LinkedIn to offer his view on the decision.

In his opinion, the move will see costs rise rather than fall:

“Shippers and forwarders exploited the chance to drive rates low… so companies went bust, gave up, merged etc.

Many (including me) said at the beginning of this CBER evaluation that one should be careful of unintended consequences. This was for all intents and purposes a witch hunt due to Covid induced high container rates. No one ever said “the rates are too low” …

Now change will come. 24K teus vessels build for VSA’s may become dinosaurs.

This will most likely disrupt supply chains, drive cost up – not down.

And of course container operators will take a good look at Europe and perhaps … just perhaps decide to employ less tonnage on europe trades.

At a time, when losses are mounting again this CBER ruling certainly will have operators consider whether profit isn’t better than market share ! Shareholders would say yes.”


Photo: / Flickr / CC BY-NC-ND 2.0 DEED