Jul 30, 2014

Qatari government acquires majority shares in UASC

The government of Qatar disclosed in an official gazette that was published in the U.S. on July 24 (U.S. time) that it has acquired a 51.27% share in the Middle Eastern operator United Arab Shipping Co. (UASC), catapulting itself into becoming the biggest shareholder in the company with shares that exceed 50% of the total shares. With this, UASC will now be classified as a "controlled carrier (state-run operator)" pursuant to the U.S. Shipping Act of 1984, thereby making the company subject to special regulations as the notification of freight rate tariffs. However, UASC has been asking the Federal Maritime Commission (FMC) of the U.S. to ease the regulations enforced on state-run shipping companies. In light of the demand from UASC, the FMC is now seeking opinions from the relevant sectors until early August in line with its plan to make a decision about the matter based on the comments that will be gathered.

UASC was established in 1976 through capitals from six countries, comprising the United Arab Emirates (UAE), Bahrain, Saudi Arabia, Iraq, Qatar and Kuwait. Thus far, not a single nation has gotten hold of a majority share in the company. But the Qatari government recently raised its investment ratio in the company, thereby securing majority of the total shares in UASC.

Under the U.S. Shipping Act, shipping companies whose resources/assets, in full of in part, are directly or indirectly owned/managed by the government of related institution at their ship registry countries are classified as controlled carriers or state-run shipping companies. These state-run operators are subject to special regulations, such as the rule that requires them to submit a request to FMC, 30 days ahead of effective date, in case they will cut freight rate tariffs in the North America trade routes.

UASC has thus become a controlled carrier under the U.S. Shipping Act following the acquisition by the Qatari government of a majority stake in the company. However, it has recently asked the FMC to ease the regulations enforced on state-run operators. In light of the petition from UASC, the FMC will gather the relevant opinions until August 8 this year and then decide on the exemption of UASC from being subjected to the terms and conditions for state-run shipping companies based on the opinions it has obtained.

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