INLAND FREIGHT CONFERENCE APPROVED \ DOOR-TO-DOOR RATES NOW AVAILABLE IN US-LATIN AMERICA TRADE

INLAND FREIGHT CONFERENCE APPROVED \ DOOR-TO-DOOR RATES NOW AVAILABLE IN US-LATIN AMERICA TRADE

The Federal Maritime Commission has approved the first shipping conference exclusively for inland freight, giving shippers much greater access to door-to-door freight rates between the United States and Latin America.

While door-to-door rates are standard for most importers and exporters shipping between the United States and Europe or Asia, these ''intermodal rates'' have yet to become the standard in contracts for freight moving in the once sleepy, but rapidly growing, north-south trades.Port-to-port contract rates still account for between 40 percent and 60 percent of the container traffic moving to and from Latin America, shippers say. But door-to-door rates, which greatly simplify shipping and allow shippers to compare freight rates on an apples-to-apples basis, could rapidly become the norm under the new conference. It could also mean lower rates for shippers because carriers now have greater rate-making flexibility.

The newly formed Inland Shipping Service Association was granted approval by the Federal Maritime Commission to develop a U.S. intermodal tariff on shipments between the United States and 27 Latin American countries, a huge volume of cargo. It is said to be the first inland-only shipping conference in U.S. history.

The way the new conference would work is that Sea-Land Service Inc., for example, could offer a discount - called an independent rate action - to a shipper who has an existing port-to-port contract with a conference where Sea-Land is already a member.

Previously, established conferences were legally bound to cover their U.S. inland costs whenever they offered inland services as part of a port-to-port contract. If the inland portion of the transit costs the carrier $400, it has to charge the shipper a minimum of $400.

Now, with their newly created rate-setting authority, any of the six carriers in the new inland conference can effectively charge less than $400 for the inland leg as part of a discounted door-to-door rate. The key condition is that the carrier in the new inland conference be a member of the conference in which the shipper has the existing port-to-port contract.

''This new conference gives the six members the right to take an (independent action) with a U.S. intermodal-door rate that would take precedence over rates that don't move on an inland bill of lading,'' explained Frank Schwarz, chief of the FMC's office of economics.

''It's the first FMC-approved conference for U.S.-inland rates only, and all it needs now is a tariff to trigger that authority.''

The other members are Maersk Line, Crowley American Transport Inc., Dole Ocean Liner Express, King Ocean and Seaboard Marine Ltd.

INTERMODAL TARIFF

The ISSA carriers are expected to file an intermodal tariff soon with the FMC. Their independent rate actions could theoretically apply to cargo moving to and from both coasts of South America, Central America and the Caribbean, the FMC said.

''The carriers told us that their shipper-customers want to ship under an inland rate in the United States and that shippers were complaining that intermodal rates varied so widely,'' Mr. Schwarz said.

''They said they initially want to expand intermodalism in the U.S. but eventually could expand this to include inland rates in Latin America,'' he said

The new conference has the potential to affect negotiations on the next round of volume-related service contracts when they come up for renewal in the existing conferences, shippers said.

The ISSA carriers could undercut their competition by banding together to win volume-related discounts from U.S. trucking firms and rail carriers, they speculated, and then pass that discount along to help capture coveted high-value cargo.

''This seems like a grand recipe for rate instability because downward rate pressure is always increased whenever you introduce intermodal rates,'' said Alex Knowles, chief operating officer for Direct Container Line, a high-volume consolidator.

''It inevitably leads to rate cuts because the lines must always look for ways to subsidize the inland movement by dropping their ocean rates.''

The new conference also has the potential to undermine the solidarity of existing conferences because ISSA members will have the potential to negotiate individually via rate actions, undercutting rates they collectively negotiated in those conferences, shippers said.

''It's very strange when you can have carriers in one conference take rate actions to drop their rates below those rates that they already offer in another conference,'' one Miami-based consolidator said.

RATE FLEXIBILITY

Such rate flexibility underscores the inability of the high-volume Inter-American Freight Conference between the U.S. and South American east coasts, for instance, to slash their rates on inland movements in the United States.

The IAFC offers volume-related service contracts for port-to-port services only on cargo moving to and from Brazil, Argentina and Uruguay and must legally cover its costs when it offers an intermodal rate to the U.S. interior.

''I can't see any rationale for this other than the fact that the carriers want to use their negotiating clout to guarantee large volumes on the inland leg in the U.S. so they can win big discounts from truckers and rail carriers,'' said a senior official at a regional carrier that moves goods between the U.S. and the South American east coasts.

''They could clearly be trying to put economic pressure on us as the traditional 'little guys' but I certainly think we'll try and match them on rates and services to protect our market.''

Maersk Line is seeking to develop the new conference to help make more consistent the often wide variations in the rates for U.S. inland shipments on cargo moving to Latin America, said Kenneth Jorgensen, the carrier's manager of strategic services for Latin America.

The Danish carrier currently belongs to ''probably less than a dozen conferences'' in the north-south trades, he said.

''We felt that you need something like this because it can be very difficult to explain to shippers the reason why you might have one rate from one country and then a lower rate from a country that involves a greater distance,'' Mr. Jorgensen said.

''It's also very difficult to reach a compromise on those rates within existing conferences and this will give us the chance to create our own inland rates.''

Five of the six carriers initially filed with the FMC last year to create the broad new powers in the ISSA but the agency rejected the application at that time because of insufficient documentation, Mr. Schwarz of the FMC said. It approved the filing April 30, however, and then Seaboard Marine joined the conference as the sixth member May 13.