FMC invites input on rule change proposals on rate index-based contracts

Time:2011-10-18 Browse:51 Author:RISINGSUN

THE US Federal Maritime Commission (FMC) is revisiting rules governing the application of ocean freight rate indices to adjusting terms of long-term shipping contracts, and invites comments on the proposals by Monday November 28.

Up till now, FMC reluctance to approve the technique was based on the lack of free universal availability of such indices when some are nominally free of charge, but exact charges for historical data.


For example, until August 2011, the Transpacific Stabilisation Agreement (TSA) index was not available to the public, even though some service contracts referenced TSA index before its publication, the FMC said. Moreover, the CCFI, the SCFI, and Drewry indices made current index levels available free, but access to historical data requires payment of fees that can thousands of dollars annually.


The key indices today are the China Containerised Freight Index (CCFI), the Shanghai Containerised Freight Index (SCFI), the Drewry Freight Insight Index and the Transpacific Stabilisation Agreement (TSA) Index.


The FMC assigned a working group in May to examine a container freight index and the derivatives market to inquire into problems in using such indices in service contracts and index-based futures transactions. The FMC has voted in favour of a going forward with a proposed rulemaking to ease restrictions.


"Questions have arisen whether references to these indices in service contracts are consistent with regulations," said the FMC, reported American Shipper. "The commission`s regulations state that the terms, if they are not explicitly contained in the contracts, must be contained in a publication widely available to the public and well known within the industry."


The commission has now decided to do a more fundamental assessment of whether the regulation in its current form is more restrictive than is necessary to protect the shipping public and carry out the purposes of the Shipping Act", the FMC said, adding that the old regulation has possibly inhibited the growth of index-linked contracts.