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Tuesday, October 13, 2015
American President Challenges Matson's Guam Monopoly
By Michael Hansen @ 2:49 AM :: 5762 Views :: Jones Act

by Michael Hansen, Hawaii Shippers Council, October 12, 2015

The American Shipper Magazine reported on October 12, 2015, that foreign-owned American President Lines Ltd. (APL) will inaugurate a new service from the U.S. West Coast to the U.S. islands of Guam and Saipan employing foreign-built U.S. flag containerships.

APL is a wholly-owned subsidiary of Singapore-based Neptune Orient Lines Limited (NOL) providing liner container and logistics services. APL is the 8th largest containership operator in the world. NOL was founded in 1968 as Singapore’s national shipping line wholly owned by the Government of Singapore. Today NOL is privately owned as serves as a holding company for APL. NOL acquired APL in 1997 as a result of a change in U.S. taxation known as Subchapter F which made it untenable for owners operating international services to remain domiciled in the U.S.

Guam (along with Midway and Wake Islands) is exempt from the U.S. ship build requirement under a provision in the coastwise law known as the “Guam Exemption.” Foreign owners are permitted to own U.S. flag ships operating in the foreign trade (as opposed to the domestic Jones Act trades). Saipan is the seat of government, largest settlement and main port in the Commonwealth of the Northern Mariana Islands (CNMI), which was exempted from maritime cabotage by the international treaty that provided for its annexation by the U.S.

APL announced on October 8th they would inaugurate on November 1st a weekly Transpacific service to be known as Eagle Express (EX1) employing six (6) foreign built U.S. flag containerships with a nominal capacity of 5,100 TEUs with port rotation of: Qingdao (China), Shanghai (China), Busan (South Korea), Los Angeles, Oakland, Dutch Harbor (Alaska), Yokohama (Japan), Busan, Naha (Okinawa) and Qingdao.

APL will link Guam and Saipan to their new Transpacific EX1 service at Yokohama with feeder service to be known as Guam Saipan Express (GSX) operating fortnightly (every two weeks) and employing a single foreign built U.S. flag containership with the capacity of 1,100 TEU. In addition to mainland U.S. cargo from EX1 transshipped at Yokohama, the GSX will carry local and other transshipment cargoes through APL’s extensive international network. The inaugural voyage of the GSX is scheduled to depart Yokohama on November 24th.

The APL Transpacific EX1 routing appears to be competitive on several levels and will provide real competition to Matson Inc. / Matson Navigation Company Inc. on two routing segments. The Westbound call at Dutch Harbor, Alaska, will be for the seafood exports from the Bering Sea fishery. The Westbound calls at Yokohama (Japan), Busan (South Korea) and Naha (Okinawa), employing U.S. flag ships will garner U.S military preference cargo for the U.S. bases at Yokosuka (Tokyo Bay), in South Korea and on Okinawa.

The fortnightly APL Guam Saipan Express (GSX) connecting at Yokohama will compete directly with Matson’s weekly containership service with calls directly from Los Angeles at Guam. Matson transships cargo from Seattle and Oakland at Honolulu and cargo bound for Saipan is transshipped at Guam. The less frequent APL service will likely be most competitive with Matson for those cargoes Matson transships en route to Guam and Saipan.

The APL Transpacific EX1 service will be competitive Eastbound (from Asia to the U.S. West Coast) with Matson’s China Express service. Currently Matson with their string of five U.S. built U.S. flag containerships offers the shortest cargo transit times from Shanghai to Los Angeles of 10 days for which they charge premium freight rates making their service feasible. APL’s EX1 will offer 13 days transit from Shanghai, which will be the 2nd fastest in the Transpacific behind Matson.

Finally, APL will be operating these services with significantly lower capital costs employing foreign built U.S. flag containerships.

It should prove very interesting to see how effective the APL services will be in competition with Matson at Guam and Transpacific Eastbound over time.

---30---

AS: APL unveils new transpacific loop

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