Covid-19 has prompted Singapore to extend regulation allowing liner companies to operate as consortia without infringing competition rules for another 16 months.

The legislation, known as block exemption regulation for liner shipping agreements (BEO), has formally been extended until 31 December 2021.

“The Covid-19 pandemic has resulted in contractions in manufacturing and trade globally,” said Singapore’s ministry of trade and industry (MTI).

“Disruptions in global supply chains and a dip in global demand have created significant market uncertainties and affected the outlook for the maritime sector internationally and in Singapore.”

Given the highly uncertain times brought about by the Covid-19 pandemic, the ministry said it had decided to extend the BEO in its current form for one year.

“As the prevalence and importance of liner shipping agreements may evolve arising from the pandemic, it is necessary to account for such developments in assessing the appropriate approach for Singapore in the longer term,” it added.

The Competition and Consumer Commission of Singapore (CCCS) said it supports the decision to extend the BEO for an additional year.

Competition watchdog

However, the competition watchdog added that prior to its expiry next year, it will assess and make a recommendation to the minister on the BEO.

Singapore first issued the BEO in July 2006 which initially ran until the end of December 2010. It has subsequently been extended in 2010, 2015 and now 2020.

The BEO effectively allows parties to liner shipping agreements to discuss and agree on the rationalization and management of capacity and prices, subject to certain conditions and obligations.

In particular, to facilitate competition between parties to a liner shipping agreement, the agreement must allow parties to offer, on the basis of individual confidential contracting, their own service arrangements.

It must also allow parties to withdraw from the agreement on giving any agreed period of notice without financial or other penalty, such as, an obligation to cease providing liner shipping services in a market.

It must also ensure that liner operators are not required to mandatorily adhere to a tariff and disclose, whether to other liner operators or otherwise, confidential information concerning service arrangements.

The BEO also includes obligations that ensure transport users and CCCS are kept aware of liner shipping agreements where the aggregate market share of the parties exceed the market share limit.