Ocean contracting panel: Unused opportunities in OSRA, NSAs
Participants in a National Industrial Transportation League-American Shipper-Cameron Group teleconference on ocean contracting Thursday said shippers have yet to take full advantage of opportunities afforded by confidential carrier-shipper negotiations and non-vessel-operating common carrier service arrangements.
The teleconference was split into sessions on contracting directly with ocean carriers and setting up so-called NSAs with NVOs. Most notably, in the second session, a representative of NVO BDP Transport outlined a recent survey showing the low awareness shippers have of NSAs a year after the federal government began allowing them.
In the first session, Bob Sappio, senior vice president of transpacific trade for APL, said that since the Ocean Shipping Reform Act of 1998 gave carriers and shippers license to conduct confidential negotiations on ocean freight rates, the discussions have centered too prominently on rates.
'So many contracts are so rate/volume focused and fail to take advantage of what OSRA offers,' he said. 'We've got to get with shippers to get over the yearly fight over rate reductions and work on narrowing the band of reductions and increases.'
He said OSRA has been an undeniable positive for shippers and carriers, however.
'The days of us sitting around a table and deciding prices for certain customers does not exist anymore,' he said. 'There is no price fixing.'
Sappio urged shippers and carriers to get more creative in designing contracts, including multiyear agreements, more open sharing of information and better forecasting of cargo volume.
'There should be more trust and we should be better understanding needs more,' he said. 'These types of suggestions take a lot of work.'
Sappio suggested that contracts will, in the future, be more commonly designed around time-definite service than rates.
Meanwhile, John Isbell, director of corporate delivery logistics for Nike, said shippers can help carriers by diversifying their ports of entry, allowing carriers to be profitable on more than just key Asia/Southern California services.
'If you can tell a carrier, 'We'll go to the Southeast or Pacific Northwest,' that may help the carrier out,' Isbell said. 'Carriers are looking at their margins from all their customers.'
Isbell also said shippers need to keep in mind that successfully negotiating proper rates and service levels takes resources. Nike, for example, has 13 people involved in the ocean freight negotiation process.
Meanwhile, Thomas Keene, president of BDP Transport, said NVOs have to do a better job of marketing NSAs to shippers, particularly small- and medium-sized ones.
NSAs are a recent phenomenon, with the Federal Maritime Commission only last year permitting NVOs to engage in OSRA-like negotiations and agreements with shippers for ocean bookings.
And because of the newness of the concept, Keene surmises that shippers don't have the trust built up yet to engage in service contracts with NVOs. Part of that may be because NVOs themselves have yet to take full advantage of the opportunities — as of February, only 351 NVOs of the total 3,398 operating in U.S. international trades have registered with the agency to become NSA filers.
Of that group, only 53 NVOs have actually filed NSAs with the FMC, amounting to 222 original NSAs and 144 amendments to those contracts, as reported by American Shipper earlier this year.
And the shipper survey on NSAs (85 shippers were queried in late March and early April) found that 72.8 percent had not even been offered the option of an NSA by an NVO. While only 51.5 percent said NSAs will be widely used, 67 percent said they would consider entering into an NSA, giving Keene hope that the concept will take hold.
He and Tom Craig, president of consulting firm LTD Supply Chain, said NSAs are tailor-made for small- and medium-sized shippers that lack the volume of bigger shippers and need to move goods in niche trade lanes.
Ocean contracting panel: Unused opportunities in OSRA, NSAs
