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China shipping probe set
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August 12, 1998: 2:49 p.m. ET
Federal Maritime Commission to investigate claims of unfair practices
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NEW YORK (CNNfn) - The little shipping agency that caused a fuss with Japan a year ago is now formally taking on China.
The Federal Maritime Commission said Wednesday it will begin a broad investigation into China's treatment of U.S. ship lines in that country. If the agency concludes U.S. carriers are treated unfairly, it could ban or restrict the operations of Chinese carriers serving the United States.
European and North American shipping lines claim they have encountered bureaucratic and regulatory barriers in setting up distribution operations in China. As a result, they are losing the chance to get in on the ground floor of the shipping bonanza promised by China's growing global trade.
"I have not been encouraged by government and industry sources regarding China's willingness to open up its shipping sector," said FMC Chairman Harold Creel in announcing the action.
China's ports, including Hong Kong's mammoth transshipment center, already account for roughly 13 percent of the world's general cargo activity, according to statistics from Drewry Shipping Consultants in London. That puts China on a par with the United States, which controls 13.1 percent of world port activity. China's market share, despite slowdowns resulting from Asia's current financial problems, is expected to grow over the next several years.
Modern day shipping goes well beyond the dock. Typically ship lines maintain train and truck operations that take shipments to and from interior points. In addition, ship lines also set up their own consolidation and brokerage operations to garner local freight.
In China, such distribution and brokerage operations require an assortment of government approvals and licenses. But these regulatory go-aheads have not been forthcoming.
Some executives, who asked to remain anonymous for fear of retribution, believe the Chinese government is throwing up barriers to give the national, government-owned Chinese line, China Ocean Shipping Co., a competitive advantage in the marketplace.
And the situation is beginning to attract the attention of the businesses that use ship lines to move supplies to and from factories in China.
The situation is reminiscent of a shipping scuffle with Japan last year. The Federal Maritime Commission threatened to ban Japanese ships from U.S. ports in retaliation for restrictive port practices there. The FMC dropped the threat after the Japanese government promised to make changes.
Shipping executives report those changes still have not been implemented.
Compounding the China issue is a recent U.S. government action removing Cold War restrictions on China Ocean Shipping Co. Because it is a Communist government-controlled carrier, the shipping line was required to give 30 days notice before entering a U.S. port. That robbed the carrier of schedule flexibility in providing service to and from the United States. In early 1998 that notice requirement was lifted.
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