News / Shippers: dynamic forwarders will develop the contract you want

© Pertusinas

Shippers have “become way more sophisticated” in their contracting, and increasingly demand bespoke solutions, delegates at this year’s Multimodal event in Birmingham heard. 

Catherine Emsellem-Rope, legal director at law firm HFW, noted that while prevalent in areas such as contract logistics, bespoke contracting styles had been somewhat absent in the sea freight sector for the past 20 years.  

However, Ms Emsellem-Rope revealed that HFW had seen a rise in contract negotiations, “driven by a desire from the shippers to have more certainty around the rates”. 

“I think one of the big issues for shippers is the uncertainty that these surcharges bring. Because obviously, if you don’t know exactly how much your freight is, how do you cost for your products when you’re a retailer? So having certainty around the surcharges is a big concern I think from shippers. 

“The other big concern for shippers is reliability of the service. Again, we see that as a key driver for shippers entering into long-term contracts in a way that perhaps they didn’t before,” she added.  

Another factor shippers prioritise when looking to contract, according to Ms Emsellem-Rope is “certainty that their cargo will be moved when they want it to be moved and arrive on time”.  

However, she warned that “the flip side, which makes it very difficult for the shipping lines and freight forwarders” is that shippers “don’t necessarily want to commit to the volumes”. 

“It’s very difficult to predict volumes.” she explained. “Many shippers struggle with that for obvious reasons. The way that consumers behave will impact volumes and nobody’s got a crystal ball.”

“So, I think that there’s a tension between the shippers wanting that commitment from the shipping lines that there will be service reliability, but without wanting to give volume commitments on the part of the shippers.” 

Therefore, in order for a contract to work effectively, Ms Emsellem-Rope advised “there’s always got to be a bit of give and take”. 

And while larger shippers boast the volume to negotiate with the shipping lines and “have leverage to enter into more beneficial contracts”, SME shippers benefit from partnerships with freight forwarders. 

“Don’t forget that if you’re a smaller shipper, you can introduce some of these concepts that we’ve talked about in your contract with a freight forwarder. Freight forwarders are very dynamic types of organisations, willing to negotiate terms.” 

The desire for shippers to have more control over their contracting has not only lead to “more negotiations”, but Ms Emsellem-Rope added that the focus on services outside of rates could be a catalyst for index linking.  

“Obviously renegotiating a contract every 12 months is quite burdensome on the shippers and the shipping lines… Rather than focusing on renegotiating rates that you get, you can focus on other things that matters to you, like service reliability and service levels. There’s a lot of advantages,” she explained. 

But whilst HFW “think[s] it makes sense having these indexed-linked contracts, it doesn’t seem to have been taken up that much,” she concluded.