Mon, Oct

Conference freight tariff


Conference freight tariff. The word “tariff” describes a list of prices or charges of carriers providing a transport service such as carriage by sea. The conference freight tariff is such a list of freight rates uniformly charged by the members of the conference.

The tariff is contained in a rate book” which contains other details besides the “base rates for shipment of certain commodities or other types of all cargoes. For a liner conference, the base rate usually applies from the ship’s tackle (for conventional, non-containerised cargo), the Container Freight Station (CFS) or the Container Yard (CY) in the port of shipment to the ship’s tackle or terminal (CFS or CY) at the port of destination. (“Ship’s tackle” means that location immediately accessible to the cargo-handling equipment used for lifting cargo and/or containers to or from the vessel.) For intermodal transport the tariff may apply from and to inland points depending on the services performed by the principal carrier.

Some conferences’ tariffs are very complicated and can run into thousands of items and many pages. In 1990 the major conferences introduced reforms to simplify their tariffs. For example, the TWRA changed the tariffs on a number of commodities on the trade routes between the United States and Asia. Changes to tariffs may sometimes take the form of an across-the-board General Rate Increase (see below) but for 1991, the TWRA’s new tariffs were specific to commodities and shipment times, the latter targeting the major shippers’ seasonal schedules. This would allow the shippers to plan for and pass on the higher freight charges to their end customers. Originally, the member lines and their customers had to operate with a tariff rate book of thousands of pages. This was unacceptably complex.

The tariff rates are subject to surcharges such as the CAF and BAF and can also be a base gross rate or a multipart tariff. A multipart tariff is one where each section of the carriage is identified separately and is charged for separately. This would be particularly applicable in intermodal transport where the total carriage is from door-to-door. A multipart tariff would therefore include separate itemised amounts for: the road or rail transport to the CFS or CY, the storage and handling at the terminal, the transport to the loading port, the storage and handling at the loading port, the ocean freight, the handling and storage charges at the discharging port, the land transport from the discharging port to the terminal and the transport to the final destination. The biggest advantage of such a tariff is that the land sectors can be quoted and charged for in local currency. The “base gross rate” can depend on the unit value of each commodity shipped, the commodity (this is very complicated as mentioned above), the weight or measurement “revenue ton” of each consignment (whichever gives a higher rate), the weight of the consignment, the volume of the consignment and the nature of the cargo such as a rate per yacht or a rate for dangerous goods. In the latter case, special handling or stowage treatment would be charged for in addition to any additional space for non-container shaped cargo. Such considerations would include: hazardous cargo characteristics, refrigerated cargo, cargo of very high value requiring special secure stowage, long lengths and heavy lifts. The gross rates or, as sometimes called, “all-in rates” include the basic ocean freight, booking costs,- rebates, rate adjustments, surcharges, additional port charges, etc. (See also CAF, BAF and Surcharges.) The tariff rate can also vary from a full container load (FCL) to a higher rate for a less than container load (LCL) for the same commodity. On short routes, the carrier may offer to carry all goods at FAK rates, that is “freight all kinds”, irrespective of commodity. This FAK rate is a lumpsum rate.

Some liner operators and liner conferences also offer a “commodity box rate” (CBR). These latter two rates are alternatives to the usual rates related to the “revenue ton” or W/M, i.e., the rate based on the weight or measurement of the cargo.

Non-tariff rates can be set for commodities for which it is not clear that there will be regular shipments.

The fundamental philosophy seems to be that the rates for liner trades are based on the value of the commodity and the volume of traffic of a particular commodity. This is explained by using the phrase: “Charge what the market will bear”. For example, taking one large volume export commodity, textiles, the Hong Kong/Europe Freight Conference rates for carriage from Hong Kong to Western Europe was US$1,593 per TEU. For the same commodity to the West Coast of the United States, the rates of ANERA were US$3,705 per FEU , which reduced to about US$1,532 (on a proportional basis only) per TEU after a “destination delivery charge” (DDC) was deducted. For toys, another large volume Hong Kong export, the Hong Kong/Europe rates per TEU were US$1,470 and the ANERA rates were US$2,100 per FEU after deduction of the DDC, or approximately US$1,050 per TEU.

However, in addition to the above two factors, there are other factors which can be taken into consideration when liner conference or non-conference liner operators’ freight rates are assessed. This is not to say that all the factors are taken into consideration, nor that any are taken into account. The factors include: Character of cargo; Cargo availability; Packing; Damage potential; Pilferage potential; Storage; Ratio of weight to measurement; Heavy lifts; Extra lengths; Competition with goods from other sources; Competition from other carriers; Distance; Direct operating costs; Handling costs; Lighterage; Special deliveries; Fixed charges; Insurance; Port facilities; Port regulations; Port charges; Canal tolls; Port location; Possibility of securing return cargoes. The freight rate to be charged by a liner operator or conference depends on a much more simple analysis based on the answers to two questions:

What rate should be charged for a particular commodity to attract a good shipper base? (the “what the market will bear” approach).

Can the conference (or liner operator) afford to carry the cargo at this rate?

The first question requires good market surveys and research into the demand for the service. The second needs a good analysis and corporate plan concerning fundamentals such as cash flows and returns on investments.

The tariff usually contains express terms and conditions which are, ultimately, subject to the terms and conditions of the carriage under the line’s bill of lading. If a rate increase has to be made, this is subject to the terms in the tariff. Usually for a “general rate increase” (GRI) the conferences submit details of their voyage accounts to independent accountants and when it is considered that these have increased to an extent that cannot be absorbed by the lines, the accountants produce comprehensive cost statements to justify to shippers’ councils and regulatory bodies, such as the United States’ FMC, that the lines require a general upward revision of their freight rates. The notice of increase is published and usually three months pass before the GM comes into force. During this period consultations are made with and resistance met from shippers’ councils.