Ocean freight rate volatility in the US container trades is likely to increase this year, especially in the spot markets on which many non-vessel-operating common carriers (NVOCCs) and their customers rely.
A key component in this volatility is the trend toward shorter rate durations. Statistics on this are scarce, but I review thousands of ocean freight rates on a weekly basis, and I’m seeing rate validity date ranges get progressively smaller.
NVOCCs who utilize Negotiated Rate Arrangements (NRAs) to price their ocean services are increasingly offering these NRAs for terms of just seven or 15 days.
Validity dates of ocean freight rates in the US trades used to be longer. Shippers could reasonably expect many freight rates to remain unchanged and accessible for months. At minimum, rates would be valid for 30 days because of Federal Maritime Commission (FMC) tariff regulations.
This FMC tariff regulation requiring 30 days remains in effect, but it does not apply to service contracts, nor to NRAs. In 2018, the FMC plans to propose changes to its regulations that will make NRAs easier for NVOCCs to use. This will accelerate the trend toward NRAs instead of tariff rates, and contribute to rate volatility.
Ocean carriers have not been given the NRA option by FMC, but they have found ways to work around the 30-day requirement by using service contracts, and by frequently filing general rate increase (GRI) notices in their tariffs — which allow carriers to increase both tariff rates and service contract rates without shippers’ approval.
Carriers do provide the FMC required 30-day notice on these GRIs, but only in their tariff rules; shippers may be unaware that the attractive freight rates they obtain from a carrier today will automatically be increased on the first of the month because of a GRI the carrier has already filed in its tariff rules.