Shippers' associations, which pool members' cargo to negotiate volume discounts from ocean carriers, would seem to be natural competitors of non-vessel-operating common carriers, which also consolidate cargo and negotiate volume rates.
But when NVOs asked the Federal Maritime Commission recently for the right to sign confidential contracts with shippers, the American Institute of Shippers Associations supported the consolidators' position. The institute plans to file a brief this month on the NVOs' behalf.
This development is an example of how shippers' associations are evolving to accommodate the changing needs of small importers and exporters.
While shippers' associations existed for years, the Shipping Act of 1984 gave impetus to the movement by allowing unrelated importers and exporters to pool their cargoes in order to negotiate volume discount rates from ocean carriers.
The Ocean Shipping Reform Act of 1998 further enhanced the attractiveness of shippers' associations, but in a roundabout way. Under OSRA, beneficial cargo owners and ocean carriers are able to sign confidential contracts, but NVOs are not. They must publish the terms of their contracts with shippers - a requirement that puts them at a disadvantage.
Following passage of OSRA, it was thought that smaller shippers would abandon NVOs and use shippers' associations as their vehicle for combining shipments and negotiating volume discounts. But Ron Cobert, a Washington attorney who is general counsel to the American Institute for Shippers Associations, noted that there are times when a nonprofit shippers' association may wish to use the services of NVOs. If the NVO can negotiate a better deal in a particular trade lane, a shippers' association may book its cargo through the consolidator.
Large NVOs such as UPS and BAX Global are leading the drive to allow NVOs to sign confidential contracts with shippers. They are exerting their influence in Congress and before the FMC. Shippers' associations want to ensure that whatever decision is reached benefits small shippers as well as the large NVOs.
The support of small importers and exporters has given shippers' associations their staying power in the international transportation arena. By focusing on their main function, which is to secure competitive freight rates for smaller shippers, the associations have always been able to make a powerful pitch to importers and exporters, said Bengt Henriksen, general manager of Unaffiliated Shippers of North America in San Carlos, Calif.
If small shippers negotiate contracts on their own, they invariably end up paying full general rate increases and additional charges such as bunker fuel adjustments and peak-season surcharges, Henriksen said. By banding together in shippers' associations, they can negotiate volume discounts similar to what big shippers receive, and they can mitigate some surcharges and eliminate others.
"There is no doubt that there is a need for shippers' associations to help the small people," Henriksen said.
Shippers' associations also offer a number of value-added services to their members, said Sara Mayes, president of Gemini Shippers Association. Gemini updates its members on import-quota developments and other customs issues, provides links to government agencies whose regulations affect importers and exporters, and informs its members about trade news.
Shippers' associations, like the rest of the trade community, are affected by homeland security developments stemming from the Sept. 11 terrorist attacks. The American Institute for Shippers Associations is helping its members apply for membership in the Customs-Trade Partnership Against Terrorism.
Shippers and carriers are rushing to become C-TPAT-certified, which means that the Bureau of Customs and Trade Protection has checked their supply chains and found that the companies are taking measures to protect their facilities and conveyances from being used by terrorists for the transport of weapons of mass destruction. Companies that are C-TPAT-certified benefit by having fewer shipments detained for extensive cargo examinations.
Customs has advised that shippers' associations can also join C-TPAT, so the national group is providing its members with checklists and questionnaires to help them apply for certification under C-TPAT, Cobert said.
Those shippers' associations that have begun the process have discovered an additional benefit. By tightening security procedures, improving their tracking and tracing of shipments and streamlining their flow of documentation, shippers' associations are improving their business processes. "I think it's great. It's a twist I didn't expect," Cobert said.
Shippers' associations will continue to be involved in legislative issues. In addition to participating in the debate on confidential contracting, the American Institute for Shippers Associations supports the movement by shippers groups to end the long-standing antitrust immunity that allows ocean carriers to meet and discuss freight rates among themselves.
Shippers' associations are not taking the lead on the issue, however. Carrier antitrust immunity was one of the compromises between shippers and carriers that led to passage of OSRA, so shippers are treading carefully. Some shippers believe the initiative should come from the European Union, which is also addressing the issue, allowing shippers groups in the U.S. to piggyback off a European decision.
Shippers' associations continue to expand their membership base and increase the volume of cargo they ship. They do not want to jeopardize the working relationship they have established with carriers.
"We prefer to work within the existing reasonable rate structure to get the best deal we can get for our members," Cobert said.