Oct 27, 1988

SHIPPING: REFORMIST ROLE OF LINER CODE HELD RELEVANT TO REVIEW.

GENEVA, OCTOBER 20 (IFDA/CHAKRAVARTHI RAGHAVAN) The 1974 UN code on liner shipping was the outcome of an overall compromise, but it had also sought to perform a reformist role in world liner shipping in relation to third world preoccupations and aspirations according to the UN Conference on Trade and Development.

Both these aspects, the UNCTAD secretariat suggests, should be kept fully in mind at the review conference on implementation of the UN convention on a code of conduct for liner shipping, due to start a three-week session on october 31.

Adopted in 1974, the convention with 71 contracting parties has been in force only since October 6, 1983.

The review conference is mandated to review the working of the convention, with particular reference to this implementation, and consider and adopt appropriate amendments.

But in order to consolidate and carry forward the achievements of the code, the review conference should make its best efforts to reach decisions on the basis of consensus and flexibility, taking into account the real socio-economic differences between countries at different stages, and on different paths to, economic development.

In the secretariat's view, there is a broad consensus that the review conference should adopt a flexible approach, having regard to the nature of the questions suggested for consideration by the conference.

Several of these questions are concerned with interpretation of specific provisions of the convention or specific modalities of their implementation.

There are also questions relating to the activities of non-conference lines, which have a close bearing on the objectives of the convention and its implementation.

However, the report adds, these may be more appropriately dealt with outside the provisions of the convention.

"Flexible solutions to such problems could be found through agreed guidelines on the interpretation and implementation of the convention as well as on questions relating to non-conference lines, which could be included in one or more memoranda of understanding or similar instruments", the report adds.

The convention, the report underlines, was the result of lung drawn out negotiations, in which compromises were found through language that provided for flexible interpretations.

"Given this context any attempt to seek to give greater precision to the language of some of the provisions of the convention through specific amendments might create more problems than it would solve," UNCTAD warns.

The report however notes that the convention was adopted 14 years ago, and since its adoption a number of technological and structural changes had taken place in world shipping.

These changes would have to be taken into account and provided for, and this could best be done by specific amendments.

None of the 71 contracting parties have as yet communicated formally to the depository, as required by the convention, the texts of their legislative or other measures to implement the convention.

However, nearly all of the nine OECD countries which are contracting parties have enacted specific national laws to give effect to the convention, and ensure-that their executive and judicial authorities have the power to implement the code.

The member-states of the EEC have adopted implementing legislation fully reflecting the reservations to the convention made by the community.

These laws also have provisions to give effect to the community regulations about "unfair pricing practices in maritime transport" (which enable the imposition of additional duty on imports into EEC by ships purportedly charging unfair and much lower freight), and for coordinated actions to safeguard free access to cargoes in ocean trades.

Both these are of concern to other contracting parties, since they would have implications for commercial activities of their shipping lines or for policies and practices considered necessary by those states for implementing the convention and/or regulating their liner trades in trades with member-countries of the EEC.

All OECD countries, who are parties to the convention, the report notes also have some common policy features in their implementation.

They apply the convention to liner conferences only, and keep the liner trades open for participation by non-conference lines.

Also, the role of the government is limited to enactment of national legislation, and that of appropriate authorities to functions assigned by statute, with implementation left is on a "self-management" basis, to the interaction of commercial parties concerned.

None of the east European socialist countries have communicated any information on the legislative or other measures taken to implement the convention.

However, with one exception, all of them have made reservations excluding from the provisions of the convention liner shipping services conducted under bilateral intergovernmental agreements.

As regards third world countries, the more relevant approach to review of implementation would be the extent to which the principles of the code have been integrated into shipping policies at levels of both governments and industry, UNCTAD suggests.

While the convention came into force only in October 1983, since 1974 third world countries have generally viewed its provisions as "a fundamental reference point" for the development of their national merchant shipping policies.

In the years immediately following the adoption of the convention, there had been little expectation that there would be sufficient number of states with required tonnage that would ratify the convention and bring it into force.

In these circumstances, most third world countries, which gave importance to development of national merchant shipping, adopted policies for implementation of the principles of the code.

Some with national shipping lines sought to exert influence on liner conferences, with varying degrees of success, for effective application of the principle of cargo-sharing embodied in the code.

In general, the stronger the national shipping line or lines and the greater the support from the government, "the more satisfactory" were the results for the country concerned.

However, most of the third world countries have been hesitant, since the entry into force of the convention, to enact specific legislation incorporating the convention within the framework of their national laws.

This UNCTAD adds, might be attributed largely to the situation of serious over tonnage in liner trades and the strong position of the non-conference lines.

In the 1980s, many of these countries had seen "a substantial erosion" of the shares of liner cargoes carried by their national shipping lines.

In this situation, these countries have a reluctance to formally incorporate the convention into their national laws without at the same time providing for legislation to regulate the activities of non-conference lines.

On this last, third world countries have differences with their trading partners on the scope of application of the convention.

A number of third world countries, before and after 1974, have enacted specific national cargo reservation legislation requiring shippers to ship a minimum of 40-50 percent on vessels of national shipping lines.

Many third world countries have exempted from such regulations liner conferences and rate agreements of which their national shipping lines are members.

In a number of third world countries with no national shipping lines before 1974, governments since then have strongly encouraged or have become more directly involved in establishing national shipping lines.

Some of these governments have adopted laws basically aimed at protecting their national maritime interests, taking into account the principles of the code, and some have provided for central cargo allocation schemes to distribute cargo to participating lines in the 40:40:20 formula.

When such centralised allocation schemes were introduced, the liner trades concerned were entirely or wholly within the ambit of the liner conferences concerned, and thus the issue whether the sharing principle to non-conference lines did not arise.

When non-conference lines appeared on the scene, they too were brought within the scope of the cargo allocation scheme, a step welcomed by the conference lines rather than giving freedom to the non-conference lines to canvass cargo as they pleased.

The governments of such countries, UNCTAD adds, subscribe to the view that the cargo sharing formula of the code is applicable to the entire liner trades.

At the level of the industry, the report notes, the code had adopted, in all but the cargo sharing issue, the best prevailing conference practices. It was thus easy for conference lines to apply the code voluntarily.

The general philosophy of the code about shipper/conference relationships has largely been adhered to by conferences.

But in matters relating to specific duties of conferences, the situation has been much less conclusive.

A number of conferences have not begun to implement the obligations arising from the convention, due perhaps to the lack of formal requirements imposed on them by the appropriate authorities or by national laws of the countries concerned.

In the area of communication and dialogue between conferences and shippers' organisations, and between conferences and governments, there has been a great deal of improvement vis-a-vis third world countries.

Conferences on the whole have accepted that in third world countries, the state has a greater role to play in day-to-day commercial and economic operations.

Direct negotiations between governments and conferences, both at national and regional levels, through intergovernmental committees are now a well-established practice in many parts of the world.

However, there are still some liner conferences, particularly in trades of small countries or trades where one of the trading partners is not a contracting party, which do nut apply the code principles in their relations with shippers.

Overall, at an informal level there has been considerable progress by liner shipping industry to conform to the code principles.

However, there are a number of issues that need to be resolved in the interest of harmonised application of the code acceptable to all contracting parties, UNCTAD adds.