WTSA issues shipper-influenced contract pointers
Member container lines in the Westbound Transpacific Stabilization Agreement (WTSA) on Thursday published a checklist of recommended issues to consider during service contract negotiations with shippers, based on input from WTSA's Shipper Advisory Board.
The checklist comes out a day after U.S. Federal Maritime Commission Chairman Richard A. Lidinsky Jr. made his own recommendations about ocean freight contracts.
WTSA said the goal of releasing the checklist is 'to increase efficiency and clarity in the contracting process, and to minimize the potential for disputes.' The lines handle an overwhelming percent of North American export capacity to Asia.
Seven areas of contracting emerged as key components: volume commitment, rate stability and predictability, surcharges, fuel surcharges, service, recourse, and miscellaneous issues such as contract duration and detention/demurrage concerns.
'The checklist is not intended to be a rigid, one-size-fits-all approach to contracting,' said WTSA executive administrator Brian Conrad. 'It is just a set of suggestions carriers and shippers might consider in their individual contracting.
'If we learned anything from our deliberations and our discussions with the shippers, it was that the U.S.-Asia shipper base is extremely diverse in terms of commodity characteristics and company objectives,' he said. 'We simply wanted to highlight some well-known friction points in typical carrier/shipper contract discussions where some added communication, supporting data or specificity could make the process simpler, quicker, and less adversarial.'
Among the specific recommendations:
'Encourage the parties to consider a specified contract volume commitment, with better communication and more accurate forecasting about volume expectation by season, product or lane segment for purposes of reserving equipment.
'Discussion of alternative pricing components in a contract, including the term during which rates are effective, possible reviews during the contract term, or a band in which rates could fluctuate over the entire contract term, subject to triggers.
'More clearly defining the bunker fuel charge, with consideration of either specified amounts or clearly stated links to specific carrier tariff sections, as well as the formula under which a charge would float.
'Possible notice provisions when new surcharges are introduced, discussion of the purpose of such surcharges and how they are calculated.
'More specific service commitments, with performance measures and non-performance penalties or incentives built into the contract.
'As global supply chains become more complex, time-sensitive and price-sensitive, shippers and carriers need contracts that take us beyond simple volume discounts and more fully spell out the obligations of both parties based on real-time sharing of information,' Conrad said. 'We believe this checklist will be particularly helpful to small and medium-sized shippers that may have smaller contracting or logistics staffs.'
The checklist will be posted on the WTSA Web site