Q.T. ON MQCs

   At the TPM Asia conference in Shenzhen in October, much of the discussion revolved around shippers better understanding the concept of minimum-quantity commitments.
   An MQC is a standard clause in  an ocean freight service contract that delineates how many containers a shippers must ship with a carrier over a specific period of time.
   According to carriers, however, shippers often misinterpret the MQC as the minimum amount of cargo a shipper is required to provide, and that the carrier is obligated to transport any amount over and above the MQC.
   In theory, a service contract ends when the MQC is met by shippers. But in practice, carriers are often expected to continue providing the same service and space.
   “Many think it’s ‘this is the minimum I need to provide and anything over that, you must ship,’” said Eng Aik Meng, president of APL. “No, it’s not like that. Anything over the MQC has to be a new contract.”
   “As soon as that minimum is met, the contract is complete, because the MQC has been fulfilled,” said Barry Horowitz, principal of CMS Consulting Services. “Shippers who understood that, put language in their contracts.”
   Carriers  also  said  they  have  been guilty of not collecting so-called “dead freight” — that is, space booked by shippers but not used, and thus chargeable by carriers (minus cargo handling costs).
   But shippers have their own issues with the way MQCs were employed in 2010.
   “I’m surprised MQCs were divided on a 52-week basis this year,” said Scott Larson, vice president of international logistics and custom compliance for retailer The Bon-Ton Stores. “When you divide by 52, it’s improbable for shippers to meet your MQCs. There’s no way freight could be leveled over 52 weeks. That was a surprise to the industry. Carriers were desperate — ‘fair’ and ‘partnership’ were probably not terms that were applicable to the industry.
   “We can give pretty good forecasting as far as ‘this is the two-week time when we ship’ and so we will do our MQC by week  going  forward.  I  will  do  it  very differently next year.”
   And that speaks to the specificity needed in contracts. Wherever there is opacity, there is opportunity for clauses in an ocean freight contract to be abused by either side.