IGNOU : M.COM : IBO 4 : UNIT 11 : Q - 4. What are the needs of shipping conference? How does it help in export business?

 

Ans. CONFERENCE PRACTICE

The liner shipping services are offered both by the liners which operate unitedly as well as those which operate independently. Liners in the first category are said to be members of conference.

A conference is an association of independent ship owners which is organized to restrict/ eliminate competition in the trade, regulating and rationalizing sailing schedules and ports of call. The conferences operate on the basis of written agreements, providing for a permanent secretariat and describing rights and obligations of members. The members are expected to follow the rules set by the conference under the agreement. In the event of violation of the agreed rules of discipline by a member, the agreement provides for imposing a penalty which is generally the forfeiture of an agreed bond amount deposited with the conference.

The first conference was formed in 1875 ; known as the UK- Calcutta Conference. Since then almost all trade routes have been covered by the shipping conference system. The basic aim of a shipping conference is to minimize losses or to maximize profits by combating competition among ship owners. At the same time conference binds shippers (shipping services users) and obtains continuous cargo support from them through a number of freight concessional arrangements and agreements. Major methods, which have been evolved to achieve this aim, are designed to eliminate competition from within and fight competition from outside.

Competition along the conference members is regulated by i) rate agreements; ii) control of sailing schedules; iii) pooling arrangements; and iv) good faith or performance bonds. The conferences fight competition from outsiders including shipping lines and shippers in a number of ways. The competition from other shipping lines is encountered through: i) extending conference membership to the growing outside lines; ii) agreements with other conferences operating on alternative routes in such a way that one conference operates on one route.

Competition from the skippers is blunted through three main devices for securing cargo support from the shippers. These devices are :

i) Deferred rebate on commissions arrangements

ii) Immediate cash rebate agreements

iii) Dual rate agreements.