ASF SERCASF Shipping Economics Review Committee
c/o Japanese Shipowners’ Association
Kaiun-Building, 6-4 Hirakawa-cho 2-chome
Chiyoda-ku Tokyo Japan 102-8603
E-mail : int@jsanet.or.jp
Tel:+81-3-3264-7180 Fax:+81-3-5226-9166

8 October 2013, Bangkok, Thailand

NOTE OF UNDERSTANDING
adoptedat the 26th Interim Meeting of the Asian Shipowners’ Forum (ASF)
Shipping Economics Review Committee (SERC)

The 26th Interim Meeting of the ASF SERC was held in Bangkok, Thailand on 8October 2013. The meeting was attended by delegates from the ASF member
associations of ASEAN, China, Chinese Taipei, Hong Kong, Japan and Korea. The
attendance list is attached. The SERC members were firmly committed to ensure fullcompliance with all applicable competition laws throughout the entire programme
under the careful observation of their counsel, as in previous meetings. The delegatesexchanged the following information and opinions.
1. World Economy
The U.S. economy is on a steady track to recovery due to the continuation ofquantitative easing and so called shale gas revolution. However, there is the delicate
issue of what will happen after tapering. In addition to having a direct impact on theU.S. economy, tapering would trigger a withdrawal of money from emerging countries
and a subsequent slowdown in their economies, which will affect the U.S. economy
negatively. In Europe, in addition to the steady showing by the U.K. and Germany,
there is an emerging sense that the economy is bottoming out in several southern
European countries. Nevertheless, it will take some time before full- fledged consumer
activity is restored in Europe as a whole. Meanwhile, turning our attention to Asia, theeconomies in the Asian countries have remained stable compared to the U.S., andEurope. Although China is no longer achieving the double-digit growth it enjoyedpreviously, it continues to maintain a high level of growth in the range of 7–8 percent.
India and the ASEAN countries are also performing at 5–6 percent. In summary, while
the global economy still faces uncertain factors, there is a steady trend toward
recovery. The situation can be described as a continuing process of trial and error inpursuit of stable growth.
2. Dry Bulk and Tanker Shipping1) Dry Bulk
The meeting recognised that the dry bulk market, especially the Cape-size market, hasrecently showed some signs of recovery, mainly due to the increase of steel
production volume, particularly in China, and some improvement of the-1-

supply-demand balance because of the decreasing number of new ships being
delivered and the demolition of old tonnage. It was expected that the demand for drybulk would likely continue to grow due to persistent demands for urbanisation in theemerging countries, as typified by the new Indian infrastructure project worth 1.83tn
rupees, which was approved this August. At the same time, the delegates expressed
their expectation of a further improvement of the supply-demand balance as a result ofindividual carrier decisions to scrap tonnage in the short term. On the other hand, themeeting also recognised that new building order has tended to increase recently
including speculative orders spurred by the lower prices by shipbuilders.
2) Tanker
It was reported that global oil demand would continue to increase slightly until 2017and oil demand in emerging countries, especially China and India, would becontinuously strong. On the other hand, the meeting noted that, although some newships would be expected to be delivered in 2014, new deliveries would decrease from2015. Considering these situations, the delegates shared the view that the crude oiltanker market in 2013 was expected to bottom out and that some signs of recovery
would emerge in 2014. However, the meeting shared some concerns, especially on
the uncertainty of future crude oil demand and unexpected new orders in the next fewyears.
With regard to the LNG tanker sector, it was expected that an excess of supply wouldexpand from 2014 to 2016 due to speculative orders made in 2012, and afterwards,demand would increase from 2016 or 2017 but the supply-demand balance would be
uncertain because of possible new tonnage.
3. Liner Shipping
It was noted that while economic conditions in the US were improving, the pace ofeconomic recovery remained slow and consumer demand continued to be muted. On
the other hand, the meeting concurred that China was expected to continue withconsistent growth, although its growth figures have waned since their height a fewyears ago, and South East Asian countries were also expected to be another engine
for global economic growth as the next global factory.
With regard to the US trans-Pacific trade, the meeting recognised that althoughdemand was showing a gradual increase, it was not enough to offset a continuous
supply/demand imbalance due to the further deployment of larger vessels in this trade.
In this regard, it was reported that the average container vessel sizes had increased byaround 32% over the last five years from 2,600 teu in 2008 to 3,430 teu in 2013, andthat the supply tonnage would increase by 6% in 2013 and then would reach its peak in
2014, marking a 7.1% increase. In addition, the meeting delegates shared theirconcerns on continuous cost increases such as the inland intermodal costs and theterminal costs in the US.
In light of the situation, the delegates reaffirmed the high importance to carriers ofindependently undertaking various efforts, with adherence to all applicable competition
laws, such as more efficient services and the reduction of vessel operating costs/fuel-2-costs, and once again individually making rational economic decisions in order toensure a sustainable business environment.
Turning to the intra-Asia trade, it was noted that the market continued to grow steadily
due to the continuous development of major economies in Asia. However, overall
freight rates in the market continue to suffer from the pressure of a cascading larger
capacity and employment of previously idle capacity from third party owners.
Under these circumstances, the delegates discussed the importance of the players in
the market independently studying possible measures for surviving the situation, suchas some possible cost-cutting measures adopted in deep-sea trades, including, wherelegally permissible, the sharing of vessel space and assets, and slow steaming.
4. Antitrust Immunity
Recent developments in a number of jurisdictions were reported on. The meetingreconfirmed the ASF’s long-standing policy that the anti-trust immunity system for all
types of cooperative liner shipping agreements was absolutely indispensable for theshipping industry and the whole trading industry.
5. Other Issues
1) Panama Canal Issue
The delegates shared much concern over possible further unilateral toll increases
through the use of new toll structures applied from mid-2015. It was therefore agreed
that the ASF, in collaboration with international shipping organisations such as ICS,
and respective ASF member associations, through their own governments, urge thePanama Canal Authority to listen sincerely to users’ voices and establish a newuser-friendly toll structure and rates.
2) China VAT Issue
The delegates expressed their grave concern over the additional heavy burden on theinternational supply chain imposed by the new China VAT regime, and it was agreed tocontinue urging the Chinese government to improve the current regime and refrainfrom imposing VAT on international ocean freight in line with international tax practice.
3) Philippines Common Carrier Tax (CCT)The meeting noted some shipping bodies’ efforts in seeking the abolishment of thePhilippines CCT, which imposes a 3% tax (CCT) on only foreign carriers' freight
revenue generated from outbound services from the Philippines. It was agreed thatSERC members should request respective shipowners’ associations to urge their own
governments to lobby the Philippine government towards the abolishment of the CCT.
***
The ASF Shipping Economics Review Committee (SERC) is a forum for senior
executives of Asian shipping lines to review macroeconomic trade information anddevelopments, as they relate to shipping and trade. The objective of the SERC is toimprove the quality of executive decision-making by the review of available
macroeconomic data and the sharing of perspectives on major trade and shipping
policy issues.
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ASF SERCASF Shipping Economics Review Committee
c/o Japanese Shipowners' AssociationKaiun-Building, 6-4 Hirakawa-cho 2-chome
Chiyoda-ku Tokyo Japan 102-8603
Tel:+81-3-3264-7180 Fax:+81-3-5226-9166
E-mail :int@jsanet.or.jp

8 October 2013, Bangkok
The 26th Interim Meeting of
the ASF Shipping Economics Review Committee (SERC)
in Bangkok on 8 October 2013

Attendance List
CHAIRMAN< Japanese Shipowners’ Association >Mr Yasumi Kudo

Vice President, Japanese Shipowners’ Association(President, Nippon Yusen Kabushiki Kaisha)

MEMBERS< China Shipowners’ Association >Mr Ye Weilong
Mr Ma Jie
Mr Zhao Tiejun(Vice President, COSCO Group)(Managing Director, COSCO (Thai) Co., Ltd.)(General Manager, China Shipping (Bangkok) Co. Ltd.)< Federation of ASEAN Shipowners’ Association >< Indonesian National Shipowners’ Association >Mr Andre Ristanto
Mr Mulyadi Wibowo(President Director, PT Winning Shipping Indonesia)(CCO, PT Pelita Samudera Shipping)< Malaysia Shipowners’ Association >Mr Ong Khoon Seng

(Executive Director, Perkapalan Dai Zhun Sdn Bhd)

< Singapore Shipping Association >Mr Jason Wong

(President, South Asia Region, APL Co. Pte Ltd)

< Thai Shipowners’ Association>

Mr Sumate Tanthuwanit (Managing Director, Ngow Hcok Co Ltd.)< Vietnam Shipowners’ Association >Mr Vuong Ngoc Son
Mr Le Van Thai

(CEO, VINASHIP Shipping Co)(General Manager, Vinaship J/S Shipping Co.)

< Hong Kong Shipowners Association >Mr Michael Kwok

(COO, Orient Overseas Container Line Ltd.)-1-< Japanese Shipowners’ Association >Mr Tadaaki Naito
Mr Takuji Nakai
Mr Yukikazu Myochin
Mr Toshiya Konishi
Mr Ryoichi Oda(Executive Vice-President, Nippon Yusen Kabushiki Kaisha)(President, NYK Container Line Ltd.)(Executive Officer, Kawasaki Kisen Kaisha, Ltd.)(Managing Executive Officer, Mistui O.S.K. Lines, Ltd.)(Deputy General Manager, Corporate Planning Division,
Nippon Yusen Kabushiki Kaisha)
Mr Tsutomu Yokoyama (Executive Secretary to the President,Nippon Yusen Kabushiki Kaisha)< Korea Shipowners’ Association >Mr Yo Ick SongMr Dae-Hyoun Baek
Mr Kwang Ho Shin

(Executive Vice President & Head of Liner Unit,
Hyundai Merchant Marine Co., Ltd.)(Managing Director, Bulk Division, Hanjin Shipping Co., Ltd.)(Advisor, Korea Shipowners’Association)< National Association of Chinese Shipowners >Dr Frank F H Lu
Mr C K Ong
Mr John Ho
Mr Joseph Tsao
Mr Randy Chen
Capt Bob Hsu

GUEST SPEAKER
Mr Yoong Yoong Lee(Chairman, Yang Ming Marine Transport Corporation)(President, U-Ming Marine Transport Corporation)(President, Evergreen Shipping Agency (Thailand) Co., Ltd.)(Executive Vice President,Yang Ming Marine Transport Corporation)(Director, Wan Hai Lines Ltd.)(Secretary General, National Association of Chinese Shipowners)(Senior Manager, Corporate Strategy & Business Planning
Yamato Asia (Singapore) Pte Ltd)ASF SECRETARY
Mr Yuichi Sonoda
Mr Elvin Tan(Secretary General, Asian Shipowners’ Forum)(Executive Officer, Asian Shipowners' Forum)

LEGAL COUNSELMr Jeffrey F Lawrence(Cozen O’Connor)

SECRETARIAT
Mr Yasuhiro NishiokaMr Kengo Nakamura
Mr Akihiro Kato

(Managing Director, Japanese Shipowners' Association)(Manager, Planning Division, Japanese Shipowners’ Association)(Planning Division, Japanese Shipowners' Association)-------------------------2-