Frequently Asked Questions
Q: How does TSA make decisions about rates and charges?
A: Each member lines appoints representatives to the Agreement at various levels of decision-making authority. At all levels, a unanimous vote is required to adopt a particular recommendation. At the same time, all guidelines are voluntary and non-binding upon members once approved.
Q: So TSA doesnt actually set rates?
A: No. TSA does not file a tariff with the U.S. Federal Maritime Commission or with Asian governments. It does not negotiate rates or service contracts on behalf of members. In accordance with the Ocean Shipping Reform Act of 1998, TSA members cannot be required to disclose most terms of confidential service contracts. TSA undertakes market and commodity research on behalf of members and, from that research, may adopt recommended guidelines for actions on rates and charges. Members may act on these recommendations or not, as they see fit.
Q: What information does TSA use in developing its pricing guidelines?
A: TSA begins with the same economic and commodity data all businesses use, from press articles, government research agencies, consultant reports and the Internet. Lines add to this their own internally developed, generic market intelligence (consumer confidence, business inventories, interest rates, changes in tax or trade law, exchange rates, crop yields, etc.). TSA itself has local working committees (LWCs) in each Asian country, made up of member line sales and pricing representatives, that monitor trade, commodity, regulatory and other trends. It also has representative offices in a number of markets to conduct market research and act as a liaison with government agencies and shipper organizations where needed.
Q: Why does ocean shipping have the benefit of carrier agreements that allow joint pricing activities?
A: Carrier agreements reflect the unique characteristics of liner shipping. The ocean transportation infrastructure that moves nearly 90% of world trade is made up of carriers from many nations, most of them privately financed. Ships are mobile assets that can be redeployed as market conditions change. Without some stabilizing mechanism, short-term rate and service levels would fluctuate widely, while sharply increasing the risks for long-term investment in ships, terminals, equipment and expansion of routes and schedules.
Other transportation modes have comparable stabilizing features: Airline routes and capacity are controlled under international government agreements; rail competition is limited by physical route and track configurations. Neither rail nor motor carriers face international competition.
It should be noted that the Shipping Act of 1984 permits shippers to pool their freight and negotiate volume discounts from ocean carriers, through shippers associations. The Ocean Shipping Reform Act of 1998 (OSRA) encourages any one or more shippers to negotiate service contracts with any one or more individual carriers, to their mutual benefit. In Asia, shippers may choose to participate in shippers councils, which represent shipper interests in consultations with carrier agreements and government agencies. In the U.S. that role is filled by several transportation-focused trade associations.