APL to inaugurate new foreign flag Asia / Hawaii container service in August
by Michael Hansen, President, Hawaii Shippers’ Council, June 29, 2017
The international container shipping company APL Ltd. will inaugurate a direct Asia / Hawaii service with the first vessel arrival to Honolulu scheduled on Sunday, August 13, 2017.
APL is a wholly-owned subsidiary of the French ocean shipping company CMA CGM, which is the world’s third largest container shipping company. Previously, APL was a U.S.-owned shipping company known as American President Lines Ltd., but was sold in 1996 to the Singapore-based Neptune Orient Line (NOL) and became a foreign company. In June 2016, the Marseille-based CMA-CGM acquired a 100% interest in NOL / APL.
APL currently operates approximately 90 containerships in 110 weekly ocean container shipping services calling at ports in over 70 countries. Among its various services, APL owns and operates (through special U.S. trusts) several foreign-built U.S. flag containerships, which allows them to compete for U.S. government preference cargo (especially military preference cargoes) and makes them eligible for federal Maritime Security Program (MSP) operating subsidies. These vessels are not Jones Act eligible and cannot participate in purely domestic U.S. trades such as between Hawaii the U.S. West Coast (USWC).
APL has not formally announced their new Asia / Hawaii service, which will be known as the Aloha Express and designated with the code name “AEX.” However, their sales representatives have begun canvassing shippers (i.e., cargo owners) in Asia to introduce the new service with promotional materials. Those Asian shippers notified their customers in Hawaii who in turn alerted the Hawaii Shippers’ Council of the new service.
The APL online sailing schedule indicates their new Asia / Hawaii service will be operated with three smaller foreign flag containerships of approximately 1,000 TEU (Twenty-foot Equivalent Units) nominal and 700 TEU stability capacity. It will be a fortnightly (every two weekly) service calling at Honolulu Harbor on Sundays so the cargo would be available early in the week. Two of the ships have been identified -- the PAOLA and PAAVA – they are both registered in Madeira, Portugal, and were built in 2008. The third vessel is listed as “Partner TBA #12” meaning the ship is “to be announced.”
The scheduled port rotation for the three Aloha Express service containerships will be Shanghai (China), Busan (South Korea) Yokohama (Japan), Honolulu (Hawaii) and return direct to Shanghai.
In addition to the pending direct Aloha Express service, their shipping schedules show APL is currently offering an indirect service from Asia to Hawaii on their Transpacific Eagle Express code name “EX1” which operates U.S. flag, but the ships are not Jones Act eligible. The container cargo is relayed over Los Angeles / Long Beach to the Jones Act carriers Matson Navigation Company Inc. (Matson) and Pasha Hawaii Transport Line LLC (Pasha Hawaii) for delivery in Hawaii.
The APL Aloha Express service flier shows their direct calls at Pier 51, Sand Island, Honolulu Harbor. Coincidently, their shipping schedules indicate the direct Aloha Express ships will call at both the Matson Honolulu Terminal and Pasha Terminal Hawaii. Confusingly, the Matson Honolulu Terminal includes Pier 51B, and the Pasha Terminal Hawaii is located at Pier 51A.
The new APL Aloha Express will be in direct competition with the Japanese ocean carrier Nippon Yusen Kabushiki Kaisha (NYK Line), which operates three smaller containerships on the same port rotation in a direct fortnightly service known as Asia Hawaii Express code name “AHX.” The NYK AHX service calls in Honolulu Harbor at the Pier 1 container terminal, which is operated by Hawaii Stevedores Inc., a wholly owned subsidiary of Pasha Hawaii Transport line LLC (Pasha Hawaii). NYK Line uses the international ship agency company Inchape Shipping Services (ISS) to represent them in Hawaii.
The new Aloha Express service is similar to APL’s Guan Saipan Express code name GSX, which was inaugurated as a fortnightly feeder service in January 2016 with a single small containership and became weekly a year later with the addition of a second ship. The service operates U.S. flag with port rotation Busan (South Korea), Yokohama (Japan), Guam, Saipan (CNMI), Busan. GSX connects with APL’s Transpacific Eagle Express at Yokohama to offer through U.S. flag service from the USWC to Guam and Saipan. The GSX ships are not Jones Act eligible because they are foreign owned and foreign built. However, non-Jones Act eligible U.S. flag ships can be used in trade with Guam due to the so-called Guam exemption, and to the Commonwealth of the Northern Mariana Islands (CNMI) as its covenant, which provided for its annexation by the U.S., excluded it from cabotage.
The APL GSX service has offered competition to Matson’s Transpacific service which calls at Apra Harbor, Guam, Westbound en route to China. Matson had the domestic shipping service to Guam to its self as a monopoly since Horizon Lines Inc withdrew from the trade in November 2011. In response to APL’s GSX service, Matson has challenged the eligibility of APL’s ships for MSP operating subsidy of $5.0 million per ship. This has become an issuefor the Sailor’s Union of the Pacific (SUP), which is threatening to strike Matson on Friday, June 30, 2017.
Reliable sources have provided additional information regarding the APL services to Hawaii.
We were informed that APL will continue to offer their indirect service from Asia to Hawaii after their direct Aloha Express AEX service is up and running. This indirect service operates on their U.S. Flag Eagle Express EX1 and connects with Matson and Pasha at Los Angeles / Long Beach to Hawaii. APL has had a long standing arrangement known as a connecting carrier agreement with Matson, and more recently has made the same arrangement with Pasha.
In the future, the indirect service could be more attractive than the direct service depending on where in Asia the cargo originates as the Eagle Express calls at more ports in Asia than will Aloha Express and may offer a better connection in certain instances. In addition, when U.S. preference cargo is involved, the U.S. flag Eagle Express Transpacific route plus fully Jones Act carriage from the USWC to Hawaii meets the higher preference requirements.
We are advised that it’s not completely settled at this time which terminal the APL direct Aloha Express ships will use in Honolulu, but we’re told its more likely to be the Pasha Hawaii terminal at Pier 51A on Sand Island.
APL will stand-up their own office in Hawaii to handle the Aloha Express service, and not use a ship agency in Honolulu. However, an office site hasn’t yet been finalized. Approximately five staff members are to be hired in addition to the general manager.
APL’s General Manager Hawaii will be Ali Behruz Nikkhoo, who was formerly Vice President and General Manager, Hawaii, for Horizon Lines, having been named to that position in June 2011.
It’s reported Tom Colson will be APL’s Hawaii Manager of Sales and Pricing. Colton was previously with Island Agencies representing Philippines, Micronesia & Orient Line (PM&O) from late 1980’s through mid 2000’s and later was employed as line manager for the Marianas Express Line Ltd. (MEL) / Horizon Lines joint Micronesia service from 2012 through 2015.
We did not receive any confirmation of when APL’s Honolulu office would be open for business or a formal announcement of the Aloha Express might be issued.
APL posted on Friday, June 30, 2017, a formal announcement of the Aloha Express on their website.
American President Lines Ltd. (APL)
American President Lines (APL) was formed in 1938 by the U.S. Maritime Commission (MARCOM) from the assets of the subsidized but insolvent U.S. ocean carrier Dollar Steamship Company also known as the Dollar Line. MARCOM operated APL through World War II and finally sold it in to private ownership in 1955. For several decades thereafter, APL was the premier U.S. owned ocean shipping company, but was acquired In 1996 by the Singapore-based Neptune Orient Line Limited (NOL) also known as the NOL Group and became a foreign shipping company. NOL was founded in 1968 as Singapore’s national shipping line wholly owned by the Government of Singapore, but became privately owned and served as a holding company for APL, which at the time was 8th largest containership operator in the world. APL was sold in to foreign ownership as a result of a change in U.S. taxation known as Subchapter F which made it untenable for U.S. domiciled owners to continue operating international shipping services. In June 2016, the Marseille-based French shipping line CMA-CGM, the third largest shipping company in the world, acquired a 100% interest in NOL / APL. Among its various services, APL currently owns and operates (through special U.S. trusts) several foreign-built U.S. flag containerships that allows them to compete for U.S. government preference cargo especially military preference cargoes and eligible for federal Maritime Security Program (MSP) operating subsidies. These vessels are not Jones Act eligible and cannot participate in most coastwise trades.
Aloha Express (AEX) Service -- APL shipping schedules show the AEX small containerships: PAOLA and PAAVA
APL is showing their Hawaii direct schedule as follows:
Next departure from Shanghai on June 29th APL CHINA Voy 209 arrival Honolulu (Matson & Pasha) July 18th
PAOLA Voy 001 Dep Shanghai July 25th Arr Honolulu Aug 13th
PAAVA Voy 001 Dep Shanghai Aug 8th Arr Honolulu Aug 27th
Partner TBA #16 Voy 001 Dep Shanghai Arr Honolulu Sep 10th
The direct EX1 service would appear to be scheduled to operate at a fortnightly frequency.
There is one direct and one indirect domestic common carrier in the Guam trade as follows:
Matson Inc. – Containership operator with services in Alaska, Guam, Hawaii and China trades
Matson provides Westbound service to Guam by direct call on a pass-by basis with its string of five (5) Jones Act eligible China Long Beach Express (CLX) Service containerships on the port rotation: Long Beach (California) / Honolulu (Hawaii) / Apra (Guam) / Naha (Okinawa) / Ningbo (China) / Shanghai (China) / Long Beach.
Matson entered the Guam trade joining an alliance in 1996 with American President Lines Ltd. (APL). At the time APL was being sold into foreign ownership and needed Matson to operate their U.S.-Flag Guam and China services employing Jones Act eligible containerships. APL was sold to Neptune Orient Line (NOL) of Singapore in 1997. The APL / Matson alliance terminated in 2006 with APL’s departure from the trade. APL reentered the Guam trade in late 2015 with an indirect service. In June2016, the private Singapore owners of NOL / APL sold the company to the French shipping giant, CMA CGM.
APL Ltd. – A wholly-owned subsidiary of the Marseille-based containership operator GMA-CGM with worldwide services and an important operator of ships in the U.S. flagforeign (international) trade fleet.
APL inaugurated an indirect Westbound service via Yokohama, Japan, to Guam and Saipan CNMI in late 2015 employing containerships which are not Jones Act eligible. At the time, APL was a wholly-owned subsidiary of Singapore-based holding company Neptune Orient Lines Limited (NOL). NOL / APL were sold to CMA-CGM in June 2016.
The APL Westbound service to Guam and Saipan involves two separate linked parts:
· A weekly Transpacific service known as Eagle Express (EX1) employing six (6) foreign-built U.S. flag containerships with a nominal capacity of between 5,100 and 6,000 TEUs with port rotation of: Qingdao (China), Shanghai (China), Busan (South Korea), Los Angeles (California), Oakland (California), Dutch Harbor (Alaska), Yokohama (Japan), Busan, Naha (Okinawa) and Qingdao.
· A feeder service known as Guam Saipan Express (GSX) operating weekly and employing two foreign built U.S. flag containerships – the APL GUAM (Built 2001 Nominal 1078 TEU) and the APL SAIPAN (Built 2002 Nominal 1641 TEU) – with the capacity of 1,100 to 1600 TEU profile capacity each with the port rotation Busan (South Korea), Yokohama (Japan), Guam, Saipan (CNMI), Busan.
Previously, beginning in the late 1960’s, a service similar to Matson’s existing Guam service was operated consecutively by SeaTrain Lines, U.S. Lines, Sea Land Service Inc., CSX Lines LLC and finally Horizon Lines Inc. in competition with the APL and since 1996 the APL / Matson service. Horizon Lines withdrew its Guam service in November 2011.
The two ships employed in APL’s Guam Saipan Express (GSX) feeder service are: APL GUAM, APL SAIPAN
NYK Line operates a direct liner container service from North Asian ports to Honolulu, Hawaii as follows:
Full Name of Line: Nippon Yusen Kabushiki Kaisha (NYK) / NYK Line
Name of Service: Asia Hawaii Express (AHX) Service
Service Frequency: Fortnightly (every two weeks)
Port Rotation: Shanghai / Busan / Yokohama / Honolulu / Yokohama / Shanghai
Service Vessels: 3 x 1,200 TEU nominal (profile) capacity
CAPE FRANKLIN 2006 1440 TEU Marshall Islands
MARE FRIO 2003 1,200 TEU Marshall Islands
PACAO 2005 1,200 TEU Portugal
Honolulu Agent: Inchcape Shipping Services
See NYK Line press release announcing the service: NYK Announces New Service between Asia and Honolulu, Hawaii, April 11, 2012
See NYK Line Asia Hawaii Express service page.
For approximately 15 years prior to April 2012, NYK called at Honolulu, Hawaii, with a Transpacific liner container service known as the “Margarita Service,” which operated fortnightly between North Asian ports and the West Coast of Mexico and Central America with a string of six containerships. The service called at Honolulu on a pass-by basis both Eastbound and Westbound giving Hawaii shippers (i.e., cargo owners) many options. NYK replaced that service with three 700 TEU containerships operating between three North Asian ports and Honolulu on an every ten day frequency providing significantly fewer direct port options.
For many years until the mid-1980’s, the U.S. carrier, States Lines Inc., operated a liner service from a broad range of Asian ports from South East Asian to Japanese ports calling Honolulu on a weekly frequency, which was an excellent service in terms of range of ports offered by direct call and frequency. However, it is no longer feasible to operate such a service today.
U.S. Preference Cargo
The preference cargo laws are sometimes confused with the maritime cabotage and coastwise laws of the United States, but are not domestic shipping laws and refer to the U.S. international trade.
Federal laws have established preference for the carriage of U.S. government-owned and government-sponsored cargoes (collectively known as “government-impelled cargoes”) by U.S. Flag vessels in the foreign trade. These laws cover many different kinds of cargoes from U.S. military supplies, material and equipment, i.e., matériel, to humanitarian agricultural food aid and commercial export cargoes financed by the Export-Import Bank of the United States (Ex-Im Bank). Also covered are foreign source components for ships constructed in the U.S. and financed by Title XI Ship Financing Program administered by the U.S. Maritime Administration (MARAD). Preference cargoes are important in support, and integral to the operation of the U.S. Flag foreign (international) trade fleet.
The three primary federal cargo preference laws are:
· The Military Cargo Preference Act of 1904 requires all items procured for or owned by U.S. military departments and defense agencies be carried exclusively (100 percent) on U.S.-flag vessels.
· Public Resolution 17 of 1934 (P.R. 17 of 1934) requires that all cargoes generated by an instrumentality of the Government, be shipped (100 percent) on U.S.-flag vessels, unless a waiver is granted by the Maritime Administration.
· The Cargo Preference Act of 1954 requires any officer or employee of the United States traveling on official business overseas or to or from any of the possessions of the United States, unless otherwise noted, must travel and transport his personal effects on ships registered under the laws of the United States.
Maritime Security Program (MSP)
The Maritime Security Act of 1996 established the Maritime Security Program (MSP), which provides an annual subsidy to sixty 60 U.S. flag ships operating in the foreign trade, i.e., 60 of the 81 ships in the U.S. flag foreign (international) trade fleet (as of 04/01/2017). The MSP is administered by MARAD. The U.S. government grants the MSP subsidy to the ship owner in exchange for agreeing to make the ship available for military sealift in the event of an overseas contingency.
The Bipartisan Budget Act of 2015 (H.R. 1314; P.L. 114-74) raised the annual MARAD MSP payment from 3.1 to 5.0 million per ship per annum beginning in the federal Fiscal Year 2016 (October 1, 2015 – September 30, 2016).
The Guam Exemption
The Territory of Guam and the insular possessions of Midway and Wake Islands and Kingman Reef have a unique coastwise status. This sometimes leads to an assumption that the Jones Act (as narrowly defined in Section 27 of the Merchant Marine Act of 1920) does not technically apply to these U.S. Pacific Islands. While that very narrow interpretation is technically correct, it does not reflect the broader usage of the term “Jones Act” to mean the coastwise laws of the U.S., which do largely apply to these islands.
These islands are clearly embraced by the coastwise laws by Section 21 of the Merchant Marine Act of 1920, “Coastwise Laws Extended To Island Territories And Possessions,” which stated in part, “From and after February 1, 1922, the coastwise laws of the United States shall extend to the island Territories and possessions of the United States not now covered thereby . . . . .”
At that time, the Territories of Alaska, Hawaii and Puerto Rico were already embraced by the coastwise laws by effect of their respective organic acts.
The so-called “Guam Exemption” (46 U.S.C. 12111 (b)) permits the employment of U.S. flag vessels under registry endorsement in trade with those islands effectively exempting them from the U.S. build and U.S. ownership requirements and allowing the use of foreign-owned, foreign-built U.S. flag vessels in domestic trade with those islands. The U.S. flag requirement means that the ships so engaged must employ a U.S. crew and are subject to U.S. Coast Guard (USCG) inspection. The foreign ownership of a U.S. flag vessel must be arranged through a special purpose U.S. trust.
Section 46 USC 12111 reads in part, “§12111. Registry endorsement (a) Requirements. A registry endorsement may be issued for a vessel that satisfies the requirements of section 12103 of this title. (b) Authorized Activity. A vessel for which a registry endorsement is issued may engage in foreign trade or trade with Guam, American Samoa, Wake, Midway, or Kingman Reef.”
As American Samoa was made exempt from maritime cabotage by the Tripartite Convention of 1899 between the U.S., U.K. and German Empire (which inter alia divided the Samoan Islands between the U.S. and Germany and gave the U.K. dominion over the Islands of Tonga) the provisions of 46 USC 12111 are redundant in that respect.
“Registry” is a formal vessel registration status defined in law that applies to U.S. flag vessels that are not eligible for coastwise (i.e., Jones Act cabotage) trade. This is the vessel registration status assigned to the ships of the U.S. flag foreign (or, international) trade fleet, none of which are coastwise eligible, all are foreign built and about half are foreign owned.
Ali Nikkhoo Joins Horizon Lines as VP & General Manager, Hawaii
PR News Wire: 16 Jun, 2011, 11:00 ET from Horizon Lines, Inc.
CHARLOTTE, N.C., June 16, 2011 /PRNewswire/ -- Horizon Lines, Inc. (NYSE: HRZ), the nation's leading domestic ocean shipping company, today announced that Ali Behruz Nikkhoo has been named Vice President and General Manager, Hawaii, for the company's Horizon Lines, LLC operating subsidiary. Mr. Nikkhoo, a seasoned veteran with three decades of experience, will report to Brian Taylor, Executive Vice President, Chief Operating Officer and Chief Commercial Officer of Horizon Lines, Inc.
In this position, Mr. Nikkhoo will oversee the ocean carrier's weekly transportation services between the U. S. mainland and the Hawaiian Islands. He will be based in Honolulu.
Mr. Nikkhoo succeeds Mar Labrador, who is leaving the company at the end of June after ensuring a smooth transition.
"Ali Nikkhoo's comprehensive background in multiple domestic and global trade routes brings unmatchable hands-on experience to this important Jones Act service," said Taylor. "In addition to his years spent in the U.S.,Europe and Asia trades, he is well-known to many of our customers and associates. We welcome him to our team."
Mr. Taylor added: "Mar Labrador has been a long-time member of the Horizon team. I would like to thank him for his years of dedicated contributions to the company and wish him well in his future endeavors."
Mr. Nikkhoo joined Sea-Land in 1977, commencing the carrier's Iran service upon graduation from Lamar University in Beaumont, TX. He moved onto positions in Madrid, Dubai, Houston and Baltimore before being named Port Manager in Long Beach in 1987. He then worked in Djakarta, Indonesia, Singapore, Malaysia andLondon, serving in senior management positions that involved both operational and commercial accountability.
Mr. Nikkhoo joins Horizon from Honor Truck and Transfer Inc. in Long Beach, CA, where he was owner and president for eight years.