Frequently Asked Questions


Q: How does WTSA 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 WTSA doesnt actually set rates?

A: No. WTSA 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, WTSA members cannot be required to disclose most terms of confidential service contracts. WTSA 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 WTSA use in developing its pricing guidelines?

A: WTSA 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.). WTSA 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, with other transportation modes becoming more deregulated and competitive, 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, too, are mobile assets that can be redeployed when markets undergo change. Without some stabilizing mechanism, shipowners would have no incentive for long-term investment in ships, terminals, equipment and reliable routes and schedules. Rate and service levels would fluctuate widely, creating cycles of excess capacity and cutthroat pricing, followed by few service options and high rates. Other transportation modes have other kinds of stabilizing mechanisms: 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.


Q: Why should carriers be able to exchange information and develop joint pricing guidelines when their customers cannot?

A: There are precedents for similar agreement-type structures in other industries. The closest example is that of U.S. agriculture marketing boards and cooperatives, under which growers jointly pack, market, price and ship their crops. Authority to form such groups was granted in the 1930s, to create a more level playing field for farmers, who were under severe price pressure from large food wholesalers and distributors. Marketing boards and co-ops (some of whom are now customers of WTSA carriers) increased farmers bargaining power in the marketplace while allowing them to lower costs. Consumers benefited from greater commodity supplies and choice, at more stable prices.

It should be noted that shippers can pool their freight to negotiate volume discounts from ocean carriers, through shippers associations. Recognized in the Shipping Act of 1984, these associations are typically organized by shippers of the same or related commodities bicycles, toys, chemicals or forest products, for example. Changes to the law enacted in 1998 now encourage 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.
Ultimately, however, carrier agreements exist to address a specific problem that of highly cyclical markets given the unique characteristics of international liner shipping. Thus it makes sense that carriers have access to this important market stabilizing tool.