Panel: Beijing Closely Tracking Global Reaction to Ukraine Invasion

China’s Xi Jinping is closely monitoring what is happening to Russian President Vladimir Putin’s reputation following the invasion of Ukraine, retired Marine Corps Gen. James Jones said Monday. Xi is looking at how the world views Putin as a gauge of global reaction he might face should Xi move against Taiwan, Jones argued. Jones, who […]

Xi Jinping President of the People’s Republic of China speaks at a United Nations Office in Geneva on Jan. 18, 2017. UN Photo

China’s Xi Jinping is closely monitoring what is happening to Russian President Vladimir Putin’s reputation following the invasion of Ukraine, retired Marine Corps Gen. James Jones said Monday.
Xi is looking at how the world views Putin as a gauge of global reaction he might face should Xi move against Taiwan, Jones argued.

Jones, who also served as the national security adviser and top commander in Europe, said the reaction could range from hailing Putin as a world leader who is “welcomed once again to the Munich Security Conference” to condemning him as a war criminal.

“I think the Taiwanese are as willing to defend their homeland” as the Ukrainians have been, he said.

Xi and Putin “have concluded the U.S. commitment to our regional relationships are not what they used to be” when they signed a cooperative agreement package during this year’s Olympics in Beijing, prior to the invasion. With Russian forces stalled, Xi is “walking a tightrope” in his relationship with Putin, said Michelle Flournoy, former civilian policy chief at the Pentagon.

At the Atlantic Council online forum, Jones and Flournoy said in both cases – Ukraine and Taiwan – it is a struggle between democracies and authoritarian rule. The implications of the outcomes in that struggle will be felt in the Middle East, Africa, the Western Hemisphere and in India, which is a United States partner in the Indo-Pacific. Many of those nations chose not to back the U.S. in its United Nations condemnation of the Kremlin’s unprovoked attack on Kyiv. Multiple abstained although the condemnation resolution passed.

Jones said the U.S. is not helping itself with countries – like Saudi Arabia, the United Arab Emirates and others – by not having permanent ambassadors in place to show American engagement with them on economic, security and diplomatic fronts. To them, the lack of ambassadorial presence demonstrates “a void of commitment” by Washington. Flournoy added the lack of U.S. presence at meetings of regional organizations like the Association of South East Asian Nations [ASEAN] allows Chinese influence to grow unchecked.

Looking specifically at Taiwan, Flournoy said, “we really need to help with an asymmetric defense” like Ukraine has used to so far to stall the Russian advance. This would be a shift away from selling Taipei large platforms like F-16 fighters to having them build-up their anti-ship, anti-aircraft and anti-tank missile defenses and maritime defenses. The island would become “a little porcupine” to overcome and slow down an invasion across the Taiwan strait. If others, like the U.S., are to help, “they need time to arrive.”

Flournoy, who recently returned from a trip to Taiwan, said president Tsai Ing-wen has emphasized the readiness of its active forces and is paying new attention to improved reserve forces. At the same time, Taipei has created a mobilization agency to use civilians and their skills in the case of natural disasters and a possible invasion from the mainland. She noted the success the Taiwanese have had in relying on volunteerism to augment its police and fire services.

Both said there was no need to abandon “strategic ambiguity” when it comes to the defense of Taiwan. But, “frankly Beijing is going to pay a lot more attention to our actions than our words,” Flournoy added, like helping Taipei build strong invasion defenses.

“I put the responsibility of de-escalation [of tensions over Taiwan and in the South China Sea] on Beijing.” The message being sent is: “We’re going to do [Freedom of Navigation operations] when you threaten Taiwan” with air and maritime incursions, said Flournoy.

Xi’s “preferred approach is to create so much economic leverage” over Taiwan that there would be no resistance to its total alignment with Beijing. She cited China’s increased economic ties with the island in key industries there like investing in semi-conductors, encouraging Taiwanese businesses to operate across the strait and the increased recruiting of young Taiwanese to work on the mainland for higher pay and more career opportunities.

Taiwan is not the only entity or nation seeing increased Chinese business interest in its activities.

China’s economic influence, especially through its Belt and Road infrastructure initiative and regional trade pact, is widely felt across the Indo-Pacific. Washington needs to create a “counter-vortex” of economic investment across the region, Jones said. He noted 25 percent of South Korea’s gross domestic product is tied to China and the percentage is growing yearly. “That can affect South Korea’s politics at some point,” he said.

Likewise, China is Japan’s and Australia’s largest trading partner.

President Tsai Ing-wen reviews a Marine Corps battalion in Kaohsiung in July 2020. Ministry of National Defense of the People’s Republic of China

“We want to keep putting meat on the bones of the Quad,” the informal security and economic arrangement between the U.S., Australia, Japan and India, Flournoy said. She called for near-term technology wins in the Australia-United Kingdom-United States [AUKUS] agreement. “We can help with that” in New Delhi’s case in wooing India away from its reliance on Russian military systems that date back to the Cold War and still require spare parts to keep the Chinese at bay in the Himalayas.

The military sales relationship, in part, explains India’s abstention in condemning the Russian invasion of Ukraine, Flournoy said citing new reports.

Both agreed applying sanctions to Beijing in the case of an invasion of Taiwan would be far more difficult than with Russia because China’s economy is much bigger, more diverse and globally engaged, including with the U.S., than Moscow’s reliance on energy exports to boost its GDP.

Bulk Carrier Crew Members Accused of Offloading Cocaine at Sea in Australia

Authorities in Austrlia have arrested four crew members from the Cyprus-registerd bulk carrier Kypros Bravery after seizing 416 kilograms of cocaine, or about 917 pounds, that the accused allegedly offloaded…

Authorities in Austrlia have arrested four crew members from the Cyprus-registerd bulk carrier Kypros Bravery after seizing 416 kilograms of cocaine, or about 917 pounds, that the accused allegedly offloaded...

Australia Bans Exports Of Alumina and Aluminum Ores To Russia

By Thomas Biesheuvel, Mar 20, 2022 (Bloomberg) –Australia, the world’s biggest exporter of alumina, announced a ban on shipments to Russia in a move that will add further pressure on aluminum…

By Thomas Biesheuvel, Mar 20, 2022 (Bloomberg) –Australia, the world’s biggest exporter of alumina, announced a ban on shipments to Russia in a move that will add further pressure on aluminum...

Report to Congress on AUKUS Nuclear Cooperation

The following is the March 11, 2022, Congressional Research Service In Focus report AUKUS Nuclear Cooperation. From the report On December 1, 2021, President Joseph Biden submitted to Congress an “Agreement among Australia, the United Kingdom, and the United States for the Exchange of Naval Nuclear Propulsion Information.” This In Focus explains the agreement’s substance, […]

The following is the March 11, 2022, Congressional Research Service In Focus report AUKUS Nuclear Cooperation.

From the report

On December 1, 2021, President Joseph Biden submitted to Congress an “Agreement among Australia, the United Kingdom, and the United States for the Exchange of Naval Nuclear Propulsion Information.” This In Focus explains the agreement’s substance, as well as provisions of the Atomic Energy Act (AEA) of 1954, as amended (P.L. 83-703; 42 U.S.C. §§2153 et seq.), concerning the content and congressional review of such agreements.

An accompanying message to Congress explains that the agreement would permit the three governments to “communicate and exchange Naval Nuclear Propulsion Information and would provide authorization to share certain Restricted Data as may be needed during trilateral discussions” concerning a project to develop Australian nuclear-powered submarines. This project is part of an “enhanced trilateral security partnership” named AUKUS, which the three governments announced on September 15, 2021. The United States has a similar nuclear naval propulsion arrangement only with the United Kingdom pursuant to the bilateral 1958 Mutual Defense Agreement.

The partnership’s first initiative, according to a September 15 Joint Statement, is an 18-month study “to seek an optimal pathway to deliver” this submarine capability to Australia. This study is to include “building on” the U.S. and UK nuclear-powered submarine programs “to bring an Australian capability into service at the earliest achievable date.” The study is “in the early stages,” according to a November 2021 non-paper from Australia, the United Kingdom, and the United States, which adds that “[m]any of the program specifics have yet to be determined.”

Agreement Details 

The agreement, which the governments signed on November 22, 2021, permits each party to exchange “naval nuclear propulsion information as is determined to be necessary to research, develop, design, manufacture, operate, regulate, and dispose of military reactors.” As noted, this information includes restricted data; the AEA defines such data to include “all data concerning … the use of special nuclear material in the production of energy.” The AEA and 10 C.F.R. Part 810.3 define special nuclear material as plutonium, uranium-233, or enriched uranium.

The agreement, which entered into force on February 8, 2022, is to remain in force until December 31, 2023, when it will “automatically extend for four additional periods of six months each.” Any party may terminate its participation in the agreement with six months written notice. Should any party abrogate or materially violate the agreement, the other parties may “require the return or destruction” of any transferred data.

The agreement includes provisions to protect transferred data. For example, no party may communicate any information governed by the agreement to any “unauthorized persons or beyond” the party’s “jurisdiction or control.” In addition, a recipient party communicating such information to nationals of a third AUKUS government must obtain permission from the originating party. The agreement includes an appendix detailing “security arrangements” to protect transferred information.

Download the document here.

Australia to Lift COVID-19 Cruise Ban

SYDNEY, March 15 (Reuters) – Australia on Tuesday said it would lift its entry ban for international cruise ships next month, effectively ending all major COVID-related travel bans after two years and…

SYDNEY, March 15 (Reuters) – Australia on Tuesday said it would lift its entry ban for international cruise ships next month, effectively ending all major COVID-related travel bans after two years and...

Australia to Build New Sub Base for Nuclear Attack Boat Fleet

The Royal Australian Navy will establish a new submarine base on its east coast to host its planned nuclear-powered submarines and to complement the existing Fleet Base West, Garden Island submarine base, Australian officials said on Monday. The government is considering three possible locations for the new base – Brisbane, Newcastle and Port Kembla – […]

Los Angeles-class fast-attack submarine USS Albuquerque (SSN-706) and Royal Australian Navy Collins-class submarine HMAS Rankin (SSG-78) operate together in waters off Rottnest Island, Western Australia on March 4, 2015. Royal Navy Photo

The Royal Australian Navy will establish a new submarine base on its east coast to host its planned nuclear-powered submarines and to complement the existing Fleet Base West, Garden Island submarine base, Australian officials said on Monday. The government is considering three possible locations for the new base – Brisbane, Newcastle and Port Kembla – down from 19 initial candidates

Australian Prime Minister Scott Morrison made the announcement in a virtual address to the Lowy Institute, followed by a joint media release with Defence Minister Peter Dutton. Morrison stated in the address that the decision was made to support basing and disposition of the future nuclear-powered submarines, but at the same time stressed that the new base would not replace any existing Fleet Base West facilities, “This is about additional national capacity, not relocating any existing or planned future capacity for Fleet Base West. Fleet Base West will remain home to our current and future submarines, given its strategic importance on the Indian Ocean” said Morrison.

Morrison said the decision to establish an east coast submarine base has been many years in the making as part of Australia’s transition from the Collins-class submarine, and that establishing a second submarine base on the east coast will enhance Australia’s strategic deterrent capability; bring advantages in operational, training, personnel and industrial terms; and enable regular visits from of U.S. and U.K. nuclear-powered submarines.

The Fleet Base West will also receive significant funding to support Australia’s nuclear-powered submarines and enable regular visits from U.S. and U.K. nuclear-powered submarines, according to the media release. It also stated that the Australian Department of Defence estimates that more than AUD $10 billion will be needed for facility and infrastructure requirements to prepare for the future nuclear-powered submarines, including the new east coast submarine base. It also stated that Defence will engage with state and local governments to determine the optimal site, which will be informed by the ongoing work of the Nuclear Powered Submarine Taskforce. This initial work is expected to be completed by the end of 2023.

In an interview with ABC Radio on Monday, Dutton said that Australia expects a future influx of ship maintenance and support works throughout Australia, not only from Australian ships, but also partner nation ships coming into Australia.

“We’re talking not only about Australian submarines, we’re also talking about significant visits to our country from the Astute-class [submarines]. We had an Astute-class in [Western Australia] only about two months ago. We have the prospect, I think, of significant visits from the United States fleet – not just their submarines – and also the Japanese visits, the British visits of their frigates. I think you’ll see more activity from the Indians. I just think this is the new norm, tragically, because of the uncertainty within the Indo-Pacific and we’ll see that ramp up over the next couple of years,” he said.

Dutton dismissed the prospect of an intermediate submarine class to bridge the gap between Collins class and the future nuclear-powered submarine, saying it was not feasible, “What we don’t want to do is get into an immature design of a third class of subs. Navy is going to be stretched to run the Collins-class into the mid-2040s, on top of the new nuclear-powered submarines. To have a sort of son of Collins or a daughter of Collins, as it’s been referred to, so a third class of submarines, I just don’t think it’s feasible,” he said, adding that a new class would take years to design and build.

Dutton said that buying an existing nuclear-powered submarine design was not possible given that current nuclear-powered submarine construction capacity globally is now at full capacity. He added that the planned upgrades of the Collins would be sufficient until the new nuclear-powered submarines entered service, which he believes will be earlier than the general estimate of a 2040 timeframe.

“There’s been speculation around the 2040s. That’s not my expectation. I think we can build and we can put into service much sooner than the 2040s. But we’re going through an 18-month process at the moment with both the United States and the United Kingdom talking about the transfer of that [intellectual property], talking about the way in which we can build up that capability”, said Dutton who also stated that there would be more to say on the matter in the middle of this year with the next stage of the [Australia, U.K. and U.S.] discussions.

In other developments, the People’s Liberation Army Navy (PLAN) surface task group involved with the alleged lasing of an Australian P-8 Poseidon maritime patrol aircraft on Feb. 17, returned to the military port of Zhanjiang, Guangdong on Thursday last week. The task group is comprised of the destroyer CNS Hefei (174), frigate CNS Huangshan (570), amphibious transport dock CNS Jinggang Shan (999) and replenishment ship CNS Honghu (963). China’s Xinhua news agency reported that the group left Zhanjiang on Feb. 5 and successfully completed combat readiness patrols and offshore training missions in the South China Sea, East Indian Ocean, Western Pacific and other waters. Xinhua also added that the training was a routine part of Southern Theater Command’s annual plan, did not target any specific goals and conformed to relevant international law and accepted practice.

Japan also reported the sighting of another PLAN surface group on Friday, stating that the destroyer CNS Urumqi (118), frigate CNS Yantai (538) and replenishment ship CNS Taihu (889) were sighted 110 km east of Miyako Island and traveled north in the Miyako Strait between Miyako Island and Okinawa heading into the East China Sea. The release by the Joint Staff Office of the Japan Self Defense Force also stated that the replenishment ship JS Hamana (AOE-424) and the minesweeper JS Ukushima (MSC-686) conducted surveillance on the PLAN ships.

Lithuanian PM: Putin Underestimated Ukraine’s Willingness To Fight Off Russian Invasion

A frontline prime minister in the Ukraine crisis said today that Russian President Vladimir Putin underestimated Ukraine’s willingness to fight off a Russian invasion. Putin also underestimated the Western democracies and their Pacific partners’ united response to the invasion, Lithuanian Prime Minister Ingrida Simonyte said Monday at an online Washington Post forum. Simonyte noted this […]

Russian President Vladimir Putin

A frontline prime minister in the Ukraine crisis said today that Russian President Vladimir Putin underestimated Ukraine’s willingness to fight off a Russian invasion.

Putin also underestimated the Western democracies and their Pacific partners’ united response to the invasion, Lithuanian Prime Minister Ingrida Simonyte said Monday at an online Washington Post forum. Simonyte noted this isn’t the first time Putin has threatened to use nuclear weapons to settle a crisis in the Kremlin’s favor.

Simonyte added that the Ukrainians are “fighting for their land and their freedom. … [Putin] has very limited information on what’s happening on the ground in Ukraine.”

Simonyte said that “despite talks about talks [between Russia and Ukraine], they want Ukraine to surrender” under Russian conditions. At the same time as the Kremlin talks peace, “Russians are carpet-bombing Kharkiv. Everything they say is a lie.”

Kharkiv is Ukraine’s second largest city with a population of more than 1.4 million people.

In agreeing to send a delegation to meet with the Russians, Ukrainian President Volodymyr Zelensky was quoted Sunday as saying, “I do not really believe in the outcome of this meeting, but let them try to make sure … that I, as president, have not tried to stop this war.”

Speaking Friday in a separate online forum, Andrea Kendall-Taylor, director of the Center for New American Security’s Transatlantic Security program, said “we know one man is calling the shots, President Putin,” in the unfolding events. She added he has been increasingly isolated since the outbreak of the COVID-19 pandemic two years ago.

Instead of being “welcomed by Ukrainians with red flowers,” Simonyte said the Russians have been running into stiff resistance.

Jeffrey Edmonds, a senior research scientist in Russian Studies at the Center for Naval Analyses, said Friday there was “a high-level of optimism” among Russian military leaders that its pincer movement could reach objectives quickly before they crossed the borders. Kremlin military leaders did not want to become “bogged down in street-to-street fighting” in large cities or have to fight insurgents.

Russian civilian military leaders believed Ukraine’s government and armed forces would collapse quickly. After that happened, they could “cobble together” some type of pro-Russian government, said Michael Koffman, CNA’s Russian Studies program director, during Friday’s CNAS Forum.

Speaking at a Monday Pentagon press briefing, John Kirby said Russian forces are also experiencing logistics and sustainment problems, slowing their advance on Kyiv, the capital. He added that on the fifth day of fighting, “the Russians will learn from this” unexpected delay and still have significant forces in reserve.

Nearly 75 percent of the forces Russia committed to the Ukraine invasion are now in Ukraine, a senior defense official said Monday morning.

During the Washington Post event, Simonyte said Putin will find Ukraine “a little bit too big,” with too many people to control through a puppet regime or Russian occupation.

Simonyte said Putin went into this operation believing NATO and the European Union would only offer “words and prayers’’ to Ukraine if invaded. But by the weekend, Putin issued the nuclear alert order in response to what he called the “illegitimate sanctions” placed on Russia and “aggressive statements” from leading officials in NATO countries directed at Russia.

A Pentagon spokesman said Monday morning there has been no noticeable change in Russia’s nuclear posture. Later Monday, Kirby said “Mr. Putin is the one escalating this,” in threatening nations who ship military supplies and equipment to Ukraine.

“NATO reacted quickly and swiftly” to the invasion, with the United States and other allies sending “boots on the ground,” a phrase Simonyte used several times in the forum, as well as more air and maritime defenses to nations in Europe, like Lithuania. President Joe Biden has said he will not send U.S. troops to Ukraine.

“NATO is not an attack alliance; it is a defense alliance,” Simonyte said.

In talking with U.S. soldiers arriving in Lithuania they say “we’re here to defend this land” and their presence “reflects the situation on the ground,” she said.

Simonyte called Germany’s swift turn around from not sending any military aid to Ukraine to increasing its defense spending to more than 2 percent of gross domestic product and sending arms to Ukraine in response to the invasion “absolutely game-changing.”

Simonyte said NATO and EU members are in agreement there “should be stronger deterrence in the region,” and that means spending more on defense. She added Lithuania exceeds NATO’s spending threshold and has been shipping arms and weapons to Ukraine as the crisis developed.

With Lithuania bordering Russia’s Kaliningrad enclave, which is home to a large naval force, she said the biggest differences between her country and Ukraine is that Lithuania is a NATO member, falling under the collective security arrangement, and an EU member. The increased NATO presence in her nation “is a response to what Putin [is] doing” and Belarus’ actions with Russia in the invasion.

An economist by profession, Simonyte said Europeans’ reluctance to impose severe sanctions on the Kremlin for its past aggression in Georgia, Moldova and Ukraine because “we will hurt people” and because the sanctions weren’t coordinated is over.

“Now [the severity of the sanctions] is very well coordinated” among European nations as well as Pacific democracies like Japan, South Korea and Australia. She praised the Biden administration’s work in this effort. “Russia is actually very much integrated into the world economy,” primarily through energy exports and its reliance on the international financial system.

Simonyte said the new sanctions will have an impact on Kremlin leaders, oligarchs, its Central Bank and also the Russian public.

“This war is fought in their name,” she said.

She said Putin’s public popularity following the annexation of Crimea in 2014 was very high, but has eroded over time and has led to the jailing of political opponents and crackdowns on non-governmental organizations.

“It’s not possible to jail everyone,” Simonyte added when asked about demonstrations in Russia against the invasion.

At the CNAS Friday forum, Kendall-Taylor said “it’s really, really hard to understand” what Putin’s endgame is in Ukraine: Decapitate the existing government, partition the country or something else. Putin, now 70, “is thinking of his legacy.”

For those who praised Putin for his planning before attacking Ukraine, Simonyte said: “You cannot assess this under business plan criteria. There are people being killed, innocent people, kids. What Putin is doing is murder.”

‘Collusion’ drumbeat leads to multilateral probe of shipping lines

Container vessels at port with gantry cranes stretched overhead on clear day.Several trade and transport groups claim ocean carriers should lose special antitrust privileges and face stricter regulatory enforcement of shipping laws.

Container vessels at port with gantry cranes stretched overhead on clear day.

U.S. exporters and logistics companies aren’t the only ones banging on the government’s door to take action against global container lines for alleged service failures and unfair pricing during the pandemic. 

The clamor from global forwarder and shipper organizations about anticompetitive behavior got so loud that five competition authorities, including the U.S. Department of Justice, on Friday established a working group that will meet regularly to share intelligence and coordinate investigations of suspected antitrust violations. 

Many buyers of ocean transportation say the carriers have manipulated tight capacity during the pandemic through deferred and canceled sailings, and other measures, to drive rates up, resulting in record profits estimated to top $200 billion last year. A combination of antitrust immunity, a dozen years of consolidation that has left eight major carriers partnering in three alliances and an expansion into broader logistics services and control of data has enabled the largest carriers to dominate the market.

It’s the definition of an oligopoly, argue many users.

The collaboration among the Justice Department, Canadian Competition Bureau, the Australian Competition and Consumer Commission, the New Zealand Commerce Commission and the U.K. Competition and Markets Authority parallels a review underway by the U.S. Federal Trade Commission into whether anticompetitive conduct by large retailers and distributors contributed to supply chain disruptions. 

It follows a joint campaign launched last summer by the Federal Maritime Commission and DOJ to ramp up oversight of foreign ocean carriers regarding unfair rates and fees. The FMC is also conducting an audit of whether carriers are using their concentrated market status to overcharge shippers container late fees at ports. 

“While the Competition Bureau has offered businesses flexibility in contributing to legitimate pandemic response efforts that benefit Canadians, we want to be clear: We have zero tolerance for any attempts to use pandemic-related supply chain disruptions as a cover for criminal collusion that harms consumers and damages Canada’s economy,” Commissioner Matthew Boswell said in a statement. 

Organizations representing cargo owners and freight agents said the collaboration among governments is positive because no single country can properly oversee the conduct of foreign-owned shipping lines and examine their activities within powerful alliances. 

The European Union was notably absent from the liner shipping investigation. It is the largest container import market after the U.S., but regulators there appear to be taking a wait-and-see approach.

Last week, the European Association for Forwarding, Transport, Logistics and Customs Services (CLECAT) called the global container lines a cartel and requested the European Commission investigate the degree of concentration, consolidation and coordination within the industry. The request repeated one made by a consortium of shipper groups last April for an investigation into market conditions and the behavior of the carrier industry.

“The profiteering of ocean shipping carriers resulting from their capacity management strategy allowed them to acquire the market power and financial war chest that they are now using to vertically integrate, increase rates and drive out independent freight forwarders in the downstream market. New discriminatory conduct towards freight forwarders, the key organizer of service delivery across all modes of transport in door-to-door operations, will ultimately disadvantage shippers and end consumers because of restricted choice in services and higher rates,” it said in a statement.

Various freight interests have warned for years that industry consolidation, combined with carrier participation in vessel-sharing agreements, is tilting the playing field against customers and that container lines should no longer enjoy exemptions from competition law. The dislocation of shipping networks and regular circulation flows of containers resulting from the economic shock of COVID and subsequent record demand for consumer goods jammed up ports worldwide, exacerbating inefficiencies that predate the pandemic. 

Carriers have been able to defer or cancel bookings, use their alliance structures to shift vessels to the busiest trade lanes while leaving other regions short of capacity, and be selective about how much export cargo to accept. 

In Australia, backlogs were made worse by work stoppages, resulting in shipping lines omitting major ports, congestion surcharges, slow container returns, gridlock at empty container yards and fewer empty refrigerated containers being repositioned in the market. 

Exporters once benefited from favorable rates as carriers sought backhaul business but now are getting left behind as vessel operators quickly collect containers so they can pick up more high-margin import loads. Now they are fighting over available equipment and complain it can take weeks or months to place a vessel booking to reach key markets, which is driving up spot and contract rates — the same concerns voiced by U.S. agriculture exporters. 

Many shippers have resorted to stockpiling containers, exacerbating inflationary pressures, according to the Freight & Trade Alliance and the Australian Peak Shippers Association (FTA/APSA). 

Food-grade containers are often not clean enough, but when exporters complain, they are met with a take-it-or-leave-it attitude from yard operators and carriers unwilling to intervene, the shipper organization said in a paper to government officials examining potential maritime reforms. 

The FTA/APSA warned that some Australian exporters may be forced to relocate elements of their supply chains to foreign countries to remain competitive.

A major complaint of U.S. cargo interests is that ocean carriers are applying late pickup fees even when ships are still stuck on a vessel and can’t be accessed because the carriers are starting the clock based on the scheduled delivery date and not the actual time of discharge from the vessel.

Carriers insist they have deployed every available vessel to handle the record cargo volumes and that the driver of supply chain backlogs is the enormous demand for goods meeting up against operational outages caused by unforeseen circumstances.

The World Shipping Council has said that the current situation is not caused by lack of competition, noting last year that there were more than 50 ocean carriers operating in excess of 1,000 vessels that provide about 180 liner services to U.S. importers and exporters. It said the so-called Herfindahl-Hirschman Index demonstrates that the U.S. international liner shipping market, based on current vessel capacity, is very competitive and that the DOJ uses this metric in its determinations.

The ocean carrier group also reiterated that container rates, while volatile, have typically been much lower and favored shippers over the past 15 years. 

Deselecting forwarders

Forwarders and logistics companies in many regions say they face market-access challenges because some container lines now refuse to enter into contractual arrangements for regular service, forcing them onto the more expensive, and volatile, spot market.

The first sign of carriers refusing to sign contracts with logistics intermediaries came Jan. 1 from Hamburg Süd, a subsidiary of shipping giant Maersk, in the Australia and New Zealand market. Maersk has since expanded the strategy of focusing much of its coverage on multiyear contracts for the largest shippers and other carriers, such as CMA CGM, appear to be following suit. 

The development represents a material loss of direct capacity for forwarders — perhaps as much as a fifth of their normal bookings that provided some sort of short- to long-term rate protection in exchange for minimum quantity commitments. And shippers of all stripes are seeing less of the cargo honored by the fixed contracts because of ultra-strong market conditions.

“We continue to provide evidence of prejudicial shipping line practices, surcharges and freight rates increases. Further investigation is essential,” Paul Zalia, director of the Freight & Trade Alliance, said in a statement. 

Groups representing importers, exporters and freight forwarders are urging authorities to repeal antitrust exemptions that allow carriers to discuss operational issues as part of their alliance structures. 

“A combination of factors has enabled the carriers to cherry-pick the highest volume shippers for longer-term contracts and relegate others to the spot market, where they will pay multiples of the rates offered to the favored few. Linked to this discriminatory strategy, freight fowarders are being ‘disintermediated’ in the process,” CLECAT said. “In the meantime, access to container capacity, carrier schedule performance and service reliability has further dropped.”

Large container lines — Maersk, CMA CGM and Mediterranean Shipping Co. in particular — have been using their new riches to buy more freight companies and compete directly with third-party logistics companies in providing value-added services to insulate themselves from commoditized port-to-port transportation. In the past year, Maersk has acquired two international freight forwarding companies, two customs brokerages, e-commerce delivery platforms in Europe and the U.S., and last week paid $1.8 billion for Pilot Freight Services to tap into its trucking and last-mile delivery network geared to e-commerce shippers.

“The vertical integration is particularly unfair and discriminatory as carriers — enjoying an exemption from normal competition rules — are using the windfall profits to compete against other sectors that have no such immunity,” said CLECAT Executive Director Nicolette van der Jagt.

The FTA/APSA this month recommended to the Australian Productivity Commission that protections provided to shipping lines under competition law be repealed. An alternative ask is for shipping lines to be regulated by the Australian Competition and Consumer Commission, or that a federal maritime regulator be appointed to safeguard importer and exporter interests, especially the appropriateness of shipping line and terminal surcharges, fees and penalties. The groups are also calling for guaranteed minimum service levels and notification periods of at least 30 days for any new fees, as is required in the U.S.

In its filing, the shipper group pointed to carriers imposing congestion surcharges on customers in September 2020 when there were labor actions at Port Botany in Sydney instead of directing the penalties at stevedores that failed to meet service standards.

“If not collusion, it is clearly a case of ‘follow the leader’ facilitated by a market without genuine competitive tension,” the document said.

Similar concerns are being voiced in the U.K.

“We are convinced that the well-documented chaos within the container shipping sector is leading to commercial power becoming increasingly concentrated, resulting in diminished market choice and competition, and distorted market conditions,” said Robert Keen, director general of the British International Freight Association, in a statement. 

“BIFA members fully accept that a free market economy is open to all, but are increasingly concerned that the activities of the shipping lines, and the exemptions from legislation from which they benefit, are adversely and unfairly affecting their customers, especially freight forwarders and [smaller] businesses.

“The facts speak for themselves. During a period that has seen EU block exemption regulations carried forward into U.K. law, there has been huge market consolidation. The pandemic has highlighted and accelerated this development, which has also contributed to dreadful service levels, and hugely inflated rates, with carriers allocating vessels to the most profitable routes with little regard to the needs of their customers,” he said.

CLECAT noted that antitrust immunity also gives vessel operators exclusive control of supply chain data and the ability to set data standards, further their ability to limit competition and control rates for end-to-end services.

“There are no limits on the exchange of information between service providers that are now being vertically integrated, which makes information leakage into forwarding and inland distribution functions possible and inevitable,” the trade association said.

The Ocean Shipping Reform Act approved by a wide margin in the House notably attempts to address a proliferation of surcharges for late pickup and return of containers to port terminals and reduced service levels for export shippers. 

The new rules, if they become law, would require ocean carriers to certify that demurrage and detention charges comply with the FMC’s guidelines on reasonable charges. Ocean carriers are also prohibited from declining export bookings if the containers can be provided in a timely and safe manner, and are going to a destination the carrier already has on its schedule. 

The legislation also shifts the burden of proof in regulatory proceedings from shippers to the container lines and allows the FMC to self-initiate reviews of carriers’ business practices.

Click here for more FreightWaves and American Shipper stories by Eric Kulisch.

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DOJ expands scrutiny of possible supply-chain profiteers

Navy, Marines Drill with Japanese Forces in Test of New Island-Hopping Concept

The U.S. Marine Corps, U.S. Navy and Japanese Self-Defense Force teamed up in the Philippine and East China seas to test the ideas behind the Marines’ Force Design 2030 plan. Noble Fusion, held in early February, tested the Marines’ island-hopping concept with allies. “Noble Fusion allowed us to showcase our interoperability and to validate Force […]

Ships of the America and Essex Amphibious Ready Groups, and Abraham Lincoln Carrier Strike Group, sail in formation with the Japan Maritime Self-Defense Force during exercise Noble Fusion on Feb. 7, 2022. US Navy Photo

The U.S. Marine Corps, U.S. Navy and Japanese Self-Defense Force teamed up in the Philippine and East China seas to test the ideas behind the Marines’ Force Design 2030 plan.

Noble Fusion, held in early February, tested the Marines’ island-hopping concept with allies.

“Noble Fusion allowed us to showcase our interoperability and to validate Force Design 2030 initiatives in our Corps’ main-effort theatre at a scale not seen since 2018,” Col. Michael Nakonieczny, commanding officer of the 31st Marine Expeditionary Unit, told reporters.
The exercise “set conditions for the next large-scale exercise that will allow us to rehearse our response to any crisis or conflict, at an ever increasing scale.”

The drills serve as a prelude to a larger scale exercise between U.S and Japanese forces scheduled to take place in Japan later this year.

Navy Capt. Greg Baker, Commodore of Amphibious Squadron 11, said that he and Nakonieczny were studying how their forces would operate and use their personnel and equipment in unique ways. “We’ll try different things, we’ll try different ways of employing the equipment that we have, of employing the personnel that we have and mixing our teams up as best as we can,” he said, giving the example of Marine personnel working together with Navy systems and vice versa, both ashore and at sea.

A U.S. Marine Corps High Mobility Artillery Rocket System with 31st Marine Expeditionary Unit (MEU), rehearses a firing mission during a security screen at Kin Blue, Okinawa, Japan, Feb. 9, 2022. US Marine Corps Photo

One area is exploration is fires integration, not only between Navy and Marine Corps units and assets, but also with partner nations. During Noble Fusion, Commander Task Force 76, the Japan Maritime Self-Defense Force (JMSDF) destroyer JS Kongo (DDG-173), 31st MEU Marines operating from a simulated Expeditionary Advanced Base and aircraft from carrier USS Abraham Lincoln (CVN-72) participated in a simulated practice strike.

USS Dewey (DDG-105) was assigned as the oppositional force for the simulated strike while an E-2D Hawkeye from Abraham Lincoln served as the Maritime Air Controller. A P-8A Poseidon, assigned to Task Force 72, provided real-time targeting data to Kongo, the EAB, and F/A-18E Super Hornets that launched from Abraham Lincoln. Baker said that the land-based EAB served an extension of the naval forces. In conjunction with the new Marine warfare concept, the EABs are designed to be quickly assembled ground bases that serve as a sensor and a rearming, refueling and resupply node for allied forces, as well as a launching point for strikes.

“We could treat that EAB essentially like a destroyer. We could find a maritime target to go after and we could have multiple units engage that target from a destroyer or do that from an EAB by passing targeting data, as well as aircraft from land or ships. The ability to strike in the maritime is strengthened by the EAB,” Baker said.

Another use of the EABs was as refueling assets. “We’ve worked with not just refueling Marine Corps assets, but we’ve also worked with refueling joint assets and we’ve been working towards expanding that capability,” Baker said. During Noble Fusion, 11th MEU Marines from amphibious warship USS Essex (LHD-2) refueled a P-8A Poseidon in a simulated foward landing zone at Marine Corps Air Station Futenma, Okinawa.

Wasp-class amphibious assault ship USS Essex (LHD 2), left, transits the Philippine Sea with fleet replenishment oiler USNS Yukon (T-AO 202) in support of Noble Fusion, Feb. 4, 2022. U.S. Navy PhotoCol. Michael Brennan, the operations officer for 3rd Marine Expeditionary Brigade, told USNI News separately that the participation of the Abraham Lincoln Carrier Strike Group in Noble Fusion presented an opportunity for CSG 3 and the Amphibious Ready Groups/Marine Expeditionary Units to work together to rehearse a distributed command and control architecture from multiple locations, as well as coordinate aviation operations across hundreds of miles of littoral geography in the first island chain.

Lessons learned from Noble Fusion included better understanding of the coordination required to operate two MEUs/ARGs alongside a CSG at sea, how to integrate aviation operations, how to synchronize aviation strikes involving multiple multi-domain platforms, how to coordinate the defense of the amphibious task force with a carrier strike group and JMSDF assets, and how to integrate U.S. Air Force assets along with Navy and Marine Corps aviation elements.

Expeditionary Sea Base USS Miguel Keith (ESB-5), which is currently serving as the command platform for CTF 76 and Expeditionary Strike Group 7, also participated in the exercise. The Navy has been experimenting in recent years with the use of alternate command ship platforms in the Indo-Pacific, other than the lead ships of its task groups and USS Blue Ridge (LCC-19). But these experimentations geared toward specific focus missions, like the use of the Expeditionary Fast Transports for operations and engagements with regional nations. During Noble Fusion, Miguel Keith also served as a training platform for visit board, search and seizure (VBSS) training by 31st MEU Marines.

During the exercise, CTF76/ESG7 executed command and control of the composite task force from Miguel Keith. Mine Countermeasures Squadron 7 and Naval Special Warfare groups have also used Miguel Keith for command and control while in the U.S. 7th Fleet area of operations.

During the call, officials said a larger exercise between U.S. and Japanese forces, called Maritime Defense Exercise-Amphibious Rapid Deployment Brigade (MDX – ARDB) will take place later this year in Japan. Both Nakonieczny and Baker declined to confirm specific dates for the drills, but said they were looking foward to the exercise, which would be on a much larger scale than Noble Fusion and enable them to further develop joint operations with Japan’s military.

“I want more exercises and more capabilities added and involved to these exercises,” said Nakonieczny.

Aussie Big Deck Adelaide Suffers Power Outage During Tonga Aid Operations

KUALA LUMPUR, Malaysia – Landing helicopter dock HMAS Adelaide (L01), currently engaged in humanitarian and disaster relief operations in Tonga, has suffered a power outrage, the Australian Department of Defence confirmed today. The outage has not affected the ship’s ability to respond to any requirements in Tonga. The statement from the Australian DOD followed Australian […]

Landing Helicopter Dock HMAS Adelaide sits alongside Nuku’alofa to deliver humanitarian stores and medical supplies as part of OP TONGA ASSIST 22. Australian Defence Department Photo

KUALA LUMPUR, Malaysia – Landing helicopter dock HMAS Adelaide (L01), currently engaged in humanitarian and disaster relief operations in Tonga, has suffered a power outrage, the Australian Department of Defence confirmed today.

The outage has not affected the ship’s ability to respond to any requirements in Tonga.

The statement from the Australian DOD followed Australian media reports on the outage. The DOD confirmed that the outage has not impacted food supplies, air conditioning is functioning aboard much of the ship, the sanitation and refrigeration systems are functioning and that the ship is not being towed.

The statement did not say how long the ship has been without power, but Australia’s ABC News reported today that it had been without power for several days already. The DoD statement said the ship turned on back-up power “to restore essential systems.”

“The situation is being closely monitored and the safety of the ship and the embarked personnel remains our highest priority,” the statement said.

“Civilian specialists are on route to conduct an assessment of the affected systems,” it continued.

The power loss is the latest problem to hit the Australian ship. On Tuesday, the DoD confirmed that Adelaide had recorded 23 positive COVID-19 cases, all of which were asymptomatic or displaying mild symptoms. Adelaide arrived in Tonga the next day and conducted a contactless unloading of supplies onto Vanu Wharf in Nuku’alofa, Tonga. The ship is currently standing by offshore waiting for any further request by the Tongan government.

HMAS Adelaide prepares to depart the Port of Brisbane with supplies, vehicles and aircraft and sail for Tonga to provide humanitarian supplies and assistance. Australian Defence Department Photo

On the same day, Japan was also forced to temporarily suspend its air transport relief operations to Tonga from Australia due to COVID-19 cases among its personnel. Operations resumed on Saturday after replacement personnel were flown into Australia.

Australia and New Zealand have both also airlifted relief supplies and conducted disaster damage assessment flights by P-8 Poseidons and P-3 Orions, respectively. China and France have also airlifted relief supplies to Tonga.

Australia, France, Japan, New Zealand, the United Kingdom and the United States are coordinating their relief efforts together, while China is operating independently.

New Zealand replenishment ship HMNZS Aotearoa (A11), which has been in Tonga since Jan. 21, has conducted replenishment for U.S. Navy destroyer USS Sampson (DDG-102) and U.K. Royal Navy offshore patrol vessel HMS Spey (P234), both of which have been deployed to Tonga for relief efforts, with Spey conducting a contactless unloading on Wednesday.

https://twitter.com/USNavy/status/1486797420973408260

Tonga is one of the few nations in the world that is COVID-19 free and there are now concerns that personnel assisting in the relief efforts may inadvertently bring the virus to the island nation, where the Hunga Tonga-Hunga Ha’apai underwater volcano erupted on Jan. 15. The Tongan government has instituted strict protocols mandating all relief supply deliveries have to be contactless and no personnel are to come into contact with the Tongan residents.

A number of ships delivering relief supplies to Tonga are inbound with the People’s Liberation Army Navy landing platform dock Wuzhishan (987) and replenishment ship Chaganhu (967). Wuzhishan and Chaganhu are the latest PLAN ships to get dispatched to Tonga, having left Guangzhou this morning carrying 1,400 tons of supplies and equipment.

Chinese commercial ships from Fiji delivered aid supplies to Tonga on Thursday. In transit to Tonga are Japan Maritime Self-Defense Force landing ship tank JS Osumi (LST-4001), French Navy patrol vessel FNS Arago (P675) and offshore patrol vessel FNS La Glorieuse (P686), and U.S. Coast Guard cutter USCGC Stratton (WMSL-752). On scene with Adelaide, Aotearoa, Sampson and Spey is New Zealand offshore patrol vessel HMNZS Wellington (P55) and multi-role support vessel HMNZS Canterbury (L421). Aotearoa will be returning soon to New Zealand for other tasking.