Having spent most of 2020 juggling wildly fluctuating inventory demand and equally erratic freight service quality, global shippers enter the 2021 contract renewal season with ocean carriers seemingly expecting the past twelve months’ rates and performance to set a reliable precedent. So here are three tips for cargo owners contemplating their upcoming conversations with container shipping lines:
First, carriers enter the year not quite believing their luck. Spot rates have sustained historic highs in 2020 through coordinated management of capacity and unheard-of pricing discipline among consortia members. Sales teams will be under pressure to bake their new spot rates into your new contracts before it all breaks down. Given the lock-grip alliances have on capacity, you may find rate negotiations heavy going. So push for unbreakable service commitments with painful penalties for performance failures. How about a “Blank Sailing Rebate” every time your box gets left on the quay?
Second, container lines enjoy extraordinary privileges under competition law, and as a consumer of their services it’s your rights and protections that have been jettisoned in favor of an easier life for shipping execs. But while the economic morals of this policy are debated in Washington and Brussels (and maybe this year in Beijing?), treat yourself to an awkward moment by asking, “Show me how I benefit from your antitrust immunity?” And wait for an answer.
Finally, challenge surcharges — the scourge of every shipper’s budget, able to spoil a seemingly great base rate in just a few additional invoice lines. Question the cause, the amount, and the remedy. What are they for? How do you calculate them? What are you doing to prevent them? Could 2021 be the year lines learn to quote all-inclusive prices and become less about the consortia and more about the customer?