Liner Conference And Trade Lane Agreements have been in existence for many years. For several years, liner shipping companies cooperated and worked together in various ways to provide services on major trade routes. They did this through a system known as “conferences” which later transformed to “Agreements”. Today, linear conferences no longer exist, but some of the agreements formed to replace the system still function.
Linear conferences were associations of shipping lines operating in same trade and route. Members applied uniform rates and conditions, shared cargo among themselves and agreed on sailings and frequencies. The first conference is known as the “UK/Calcutta Conference “was formed in 1875. The primary reason for the formation of the conferences was to deal with the problem of unstable freight rates, overcapacity and competition among shipping line members.
Shippers who used the conference lines on a regular basis were rewarded with rebates and discounts on their freight. Some of the conferences that existed included the United Kingdom West Africa (UKWAL), the Continent / West Africa Conference (COWA), Far East / West Africa Conference (FEWAC) and the Brazil-Nigeria freight Conference (BNFC).
Conferences also acted as a representative body for their members in dealing with other associations and government agencies. As a matter of fact, the conference system set the foundation for the method of pricing and practices (loyalty agreement, pooling of resources, etc) in liner shipping today. The system brought some form of stability to freight rates and shippers were guaranteed regular sailing.
This meant that both ship owners and shippers benefited from the system. However, the virtual monopolistic nature of the system caused shippers to object to some of the ways that they operated. A notable objection was the one by the British Shippers Council which strongly criticized the activities of the liner conferences and called for a revocation of the law which protected them from the competition. Added to these criticisms were competitions from non-conference lines (especially Russian lines ) and the Trans-Siberian Railway (on the Far East / Europe trade) with more or less the same transit times.
The problems became so much for the conferences that they began to gradually disintegrate. But the problems with the ship owners were faced with in terms of unstable freight rates and overcapacity persisted. Shipping lines looking for base cargo reduced their tariffs to extremely low levels as it became a buyers market. To reverse the situation, shipping lines, including those who were not members of the conference lines, began to form Agreements.
These are agreements established by shipping lines serving same route and trade, to stabilize freight rates and control over the supply of vessels. Some of the Agreements are simply referred to as “discussions “ fora rather than trade associations so that they are not seen as working against a free market. They, however, support more competition among their members. Specifically, they discuss trade conditions and encourage the idea of a common recommended tariff and service quality. They accept that guidelines set by the Agreements may wholly or partly be executed at all in dealing with their respective shippers.
Agreement or Discussion Groups publish non-binding rates and service guidelines which their members may use in negotiating rates with their respective shippers. One of the major Agreements in liner shipping today is the Transpacific Stabilization Agreement (TSA). It represents members who serve routes between Asia and America. Another is the Europe-West Africa Trade Agreement (EWATA) which is for members who serve the UK / West Africa route.
Generally, members Agreements can do the following:
- Exchange market information on their trade lanes.
- Establish non-binding guidelines for fixing rates and charges.
- Authorize the Agreement to represent them in consultation with other associations as well as government regulatory agencies.
- Develop common non-binding and voluntary conditions of service.
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