Another step toward global deregulation

The passage in the U.S. of the Ocean Shipping Reform Act (OSRA) in 1999 changed the way U.S. companies handle ocean shipments, says Jim Preuninger, CEO of Management Dynamics (www.managementdynamics.com), a provider of global trade management solutions. Similar to the deregulation changes effected nearly two decades earlier by the Motor Carrier Act and the Staggers Rail Act, ocean shippers were no longer required to use public tariffs. Liner companies could begin negotiating unique, confidential agreements with shippers.

The recent move by the European Union to eliminate anti-trust immunity for liner conferences will bring the Atlantic trades closer to the U.S. model. However, there are some differences that may be more part of the business culture than they are lingering elements of regulation. European shippers tend to use agreements rather than contracts with their carriers.

With 10,000 agreements in its global trade solutions database, Preuninger says without exaggeration that 99% of the agreements are for one year. Those oneyear agreements are typically amended five times a year, he observes — 15 to 20 times if the agreements are managed by a non-vessel-operating common carrier (NVOCC) or forwarder. The difference, according to Preuninger, is that European shippers typically have agreements for three months. Those agreements cover base ocean rates and accessorials and surcharges. The one regulatory difference is that the U.S. Federal Maritime Commission (FMC) (www.fmc.gov) requires a public tariff for accessorials and surcharges.

Accessorials and surcharges aren't merely a pass-through expense, Preuninger points out, since carriers make money on them. Shippers have started approaching ocean shipping differently, he adds. More shippers want to manage the entire trade capability, not just transportation contracts. They are also shifting to a more inclusive view of costs, he adds.

Today, shippers want to be able to see and manage total landed costs. That seems to match the results of the European Union-commissioned study which says shippers want an all-in-one rate. The EU action is another step closer to a goal voiced by a number of shipper groups — a consistent way of operating in each of the trades where their goods flow.

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