The Transpacific Stabilization Agreement is a research and discussion forum of major ocean container shipping lines that serve the transpacific trade in both directions, between Asia and the U.S. TSA member carriers are authorized under the applicable shipping laws of U.S. and Asian governments to:
- Meet, exchange market information and jointly conduct market research
- Represent carrier interests in consultations with government regulatory bodies and with designated shipper organizations
- Develop voluntary, non-binding guidelines for rates and charges
- Discuss ways members can manage costs and improve efficiency
- Establish common terms of service and standards for certain documentation, information systems development and other activities in the public interest, also on a voluntary, non-binding basis.
History and Purpose
TSA was established in 1989 and, over time, replaced a more rigid rate conference system in the Asia-U.S. market. It reflects an evolutionary process in liner shipping from a heavily regulated common carrier system of fragmented trade lanes, basic port-to-port ocean transportation and protection of national flag fleets for trade and security reasons, to a global, more vertically integrated commercial system offering customized, value-added logistics services.
Rate conferences and agreements have existed in the U.S. since 1916. As recently as 1999 in the Pacific, ocean carrier conferences engaged in joint pricing and service contract negotiation. Rates were adopted by majority vote but were binding on the full membership. The conference maintained a joint tariff and negotiated service contracts on behalf of members.
This system was intended to stabilize both rates and service levels, and thus provide an incentive for shipowners to keep vessels in a trade during downturns; invest in long-term vessel and facilities improvement; and avoid wide swings in freight rates during boom and bust cycles. In exchange for information-sharing and joint pricing authority, conferences were closely regulated in their pricing activities.
By the 1980s, ocean transportation was becoming more differentiated. Shippers in certain commodity or market segments wanted more sophisticated service options door to door, time-definite delivery; specialized equipment and handling; valued-added warehousing and other services. Others remained focused on shipping at the lowest possible per unit price. Routing, schedule and cargo handling requirements became more specific.
Carriers needed an ability to respond quickly to changing market demand, and greater flexibility to offer individualized service and pricing as part of a long-term customer relationship. Shipping laws were relaxed in 1984 and 1998 to encourage such individual, confidential carrier-shipper relationships. Discussion agreements such as TSA have become more common as these changes in the law have taken place.
TSA carriers discuss trade conditions and agree on the need for common, recommended pricing and service goals. Adoption of policy guidelines requires a unanimous vote. But at the end of the day it is up to individual carriers to decide on a customer-by-customer basis whether to implement a guideline wholly, in part or not at all in their confidential service contract negotiations.
TSAs activities extend to one of the world's largest ocean container trade lanes in the world, with some 6 million 40-foot containers shipped annually. Countries included in TSAs scope are the U.S., Japan, Korea, Taiwan, Hong Kong, China, Singapore, Malaysia, Thailand, Indonesia, the Philippines, Brunei, Vietnam, Cambodia, Laos, Myanmar (Burma), Pakistan, Sri Lanka, Bangladesh and the Russian Far East.