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Ship rates may go incognito
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June 9, 1998: 11:33 a.m. ET
Congress poised to let shipping lines keep customer rates confidential
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NEW YORK (CNNfn) - Congress is close to letting U.S. companies and shipping lines do something they have never been able to do before: keep a secret.
For years ship lines and their U.S. customers have had to reveal exactly what prices were being charged for moving specific goods in and out of the United States. The idea was to keep ship lines, which are allowed to set prices collectively, from abusing their market power. If all rates are in the open, the thinking went, ship lines couldn't play favorites among their clients.
But as global competition has heated up in recent years, U.S. companies have found those protections to be a disadvantage when it comes to competing for overseas markets. A European company, for example, can sit down with a ship line (most often a local, non-U.S. ship line) and negotiate a special, secret contract for moving its goods from Europe to Southeast Asia. A company producing its goods in the United States, on the other hand, can not.
After several years of work, a lobbying effort spearheaded by the largest U.S. shipping line and an association overseeing transportation related issues for major U.S. companies has succeeded in moving legislation through Congress to change the system. That legislation has been passed by the Senate and is poised for a House vote.
"This will allow carriers and their shipper customers in U.S. trade lanes to sit down with one another and have the kind of relationship they want," said Christopher Koch, general counsel for Sea-Land Service Inc., the top U.S. shipping line.
"For the first time this will put U.S. shippers on a level playing field with their competitors abroad," added Peter Gatti, director of policy at the National Industrial Transportation League. "This legislation gives the U.S. company the ability to negotiate one-on-one with a carrier and on a proprietary basis, which is the way business is done everywhere else in the world."
Currently, contracts between a company and a shipping line are filed at the Federal Maritime Commission in Washington, D.C. While the name of the importer or exporter is withheld, vital items like the origin, destination, route, and most importantly the rate, are made public.
The legislation, if passed, would keep rates secret. That would give U.S. importers and exporters the ability to design special transportation arrangements -- like paying a ship line a little more for transportation to a well-established market in exchange for a discount to a new target market -- away from the prying eyes of competitors.
Ship lines would retain their antitrust immunity to set rates collectively. However, individual ship lines would have the option of going outside of the price-setting cartel to arrange a confidential contract.
Smaller companies worry that the legislation could put too much power into the hands of their larger competitors. Such leverage could be used to muscle not only competitors abroad, but at home as well. In addition, freight consolidators and other middlemen are worried that ship lines will use the ability to keep rates secret to charge smaller customers more or cut middlemen out of the business.
"We're still very concerned about the impact this will have on small forwarders and small businesses," says Ed Greenberg, an attorney representing the National Customs Brokers and Freight Forwarders Association.
Organizations like the forwarders association want more hearings on the legislation before the House votes on it. However, similar legislation already was debated by the House before the Senate moved its bill. Some lobbyists believe House leaders will simply opt to move the Senate legislation straight to a floor vote, perhaps by the end of June.
-- by staff writer Allen Wastler
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