What the CBER is - and isn’t.

Liner shipping is seen by governments around the world as a strategically important industry. Being served by an efficient and well developed network of ocean carriers increases the competitiveness of a nations exports, while at the same time facilitating cost-efficient imports, growing the economy and increasing living standards. To safeguard this critical asset, most governments have distinct regulations governing liner shipping.

The Liner shipping industry is characterized by high fixed costs in the form of investments in vessels and networks. The market has many price makers – carriers, freight forwarders, agents, exchanges – and as a well-functioning, competitive market it is very sensitive to demand and supply changes. To remain competitive, carriers must ensure the highest possible efficiency of operations to keep costs down, while maintaining the frequency and quality of their services.

That’s why vessel sharing agreements (VSA’s) are so fundamental for the functioning of global trade.

The CBER is a legal framework for VSA’s, designed to improve operational efficiency to benefit EU nations, while ensuring that competition compliance laws are upheld. It provides a clear legal structure within which ocean carriers can set up vessel sharing agreements, under specific conditions.

• Applies only for ocean carriers with a combined market share of below 30%

• Allows for vessel sharing agreements only, to improve service and efficiency

• The CBER strictly prohibits exchange of information on rates. Each member of a VSA determines its own commercial terms, including prices.

Therefore, carriers within a VSA compete with each other, and with other carriers outside of that VSA, when selling their services to customers. Additionally, carriers offer and add their own services outside of VSAs.

Vessel sharing creates an efficient and competitive marketplace.

Since the Commission last prolonged the CBER in 2020, the liner shipping industry has become more competitive rather than less. The HHI is in fact slightly lower today that in 2018 (1051 vs 1043). A number of new carriers have entered international trades, and existing carriers have added capacity both outside and within vessel sharing arrangements.

The rate levels experienced during the pandemic were the result of a surge in goods transport demand particularly from the US, labour shortages and port and hinterland congestion which removed capacity from the market.

As these problem unwind, reliability is increasing and market conditions including freight rates are rapidly normalising. The latest market data, as seen in the graph to the left based on Drewry data, are proof of the healthy state of competition in the liner shipping sector.

P.S.
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A detailed econometric analysis by Charles River Associates has shown that the freight rate surge during the pandemic was a function of increased demand and constraints on the supply of capacity due to congestion, as well as increased bunker costs. The presence of vessel sharing agreements had no upward impact on rates - rather consortia may have increased the effective capacity by decreasing the degree of congestions and delays.

Vessel sharing - increasing service and reducing emissions.

Vessel sharing is a purely operational agreement that enable carriers to share space on one another’s ships. They allow carriers to cooperate on the same service by pooling vessels, whilst independently pricing their services and competing on price. This increases efficiency, reducing emissions and supporting more service to more ports than would otherwise be the case.

VSA’s deliver widely shared public welfare benefits:

• Consumer/pro-competitive benefits. Consumers share in the benefits brought by consortia in the form of lower costs, higher service frequencies, better port coverage, and stronger price competition.

• Environmental efficiency and contribution to the EU Green Deal objectives. Consortia allow carriers to maximise operational efficiency through better fleet utilisation.  Consortia also allow carriers to use larger containerships which result in much lower CO2 emissions per container than smaller containerships.

• Macroeconomic benefits. Consortia contribute to the EU’s objectives of investment, job creation, and ensuring trading opportunities.