The US Federal Maritime Commission (FMC) wants to create a container freight rate index for US exports. What chance of success does the administration s latest initiative have? Not much, to judge from the negative reactions of influential organisations representing both shippers and ocean carriers.
The FMC has proposed launching an index covering certain agricultural commodity exports using container freight rates from service contracts filed with the Commission. The FMC s consultation of industry stakeholders attracted 16 comments and closed on the 9th August. These remarks can be found at http://www.fmc.gov/12-07.
They show that about 10 organisations are against the proposal. These include carrier bodies such as the World Shipping Council and the Westbound Transpacific Stabilisation Agreement as well as the National Industrial Transportation League which represents shipper interests. Only five organisations are in favour of the proposal.
These include Drewry, the World Food Processing Council, the National Grain and Feed Association and the National American Export Grain Association. One remains broadly undecided, namely the Agriculture Transportation Coalition. The main argument against the proposal is that it risks breaching the confidentiality of service contracts between carriers and shippers.
There is also a legal implication here. It is still an obligation under US law to file service contracts with the government, a requirement that does not exist elsewhere. US lawmakers probably never intended that these contracts would be used to produce market information.
Other organisations argue that it is not the role of a government agency to produce market indexes and that this should be left to the private sector. However, the issue here is that the FMC has unrivalled access to the most comprehensive data on contract shipping rates anywhere in the world. Also, as an impartial government agency it would probably be better placed than any private company to produce a credible US export freight rate index for agricultural commodities.
Drewry s view is that the combination of suitable protections and the use of aggregated freight rate data from service contracts (rather than the disclosure of individual service contract rates) would be sufficient to allay the fears of shipping lines and US exporters. Drewry and our World Container Index joint venture already produce a number of US export container freight rate indices, though these are for Freight All Kinds (FAK) and not by commodity. Drewry strongly supports the FMC s initiative as an important complement to its own indexes.
But the forceful contract privacy objections of major carrier and shipper groups will likely prevail and so force the government agency to drop its proposal.
This will be a shame for many US exporters still yearning for greater price transparency and the ability to fix freight rates for longer periods.
For any information on the issues raised in this briefing, please contact: Martin Dixon +44 (0)20 7538 0191 Drewry Maritime Advisors, 15-17 Christopher St, London, EC2A 2BS, United Kingdom t: +44 (0)20 7538 0191 e: [email protected] w: www.drewrysupplychains.com 2012 Drewry Supply Chain Advisors Source : http://www.drewrysupplychains.com Like this: Be the first to like this.