THE US Federal Maritime Commission (FMC) has announced that it will give more leeway to those preferring index-linked ocean freight service contracts.

    Under FMC rules, service contracts can only reference outside terms, such as a rate in a freight index, that are contained in a publication widely available to the public and well-known within the industry.

    Agreeing with its Container Freight Index and Derivatives Working Group, FMC expects it will soon allow contracts based on freight indices or other outside terms if they are available to the parties and the FMC.

    The FMC said that as a result, ocean carriers and their customers would be able to use freight index rates in their contracts free of questions over whether those indices are widely available to the public or well known.

    Said FMC chairman Richard Lidinsky: "When employed responsibly, these can be useful tools for managing risk when ocean freight markets experience volatility."

    The FMC decision dovetails with the recently launched Transpacific Stabilisation Agreement (TSA) eastbound freight rate index, which was designed to encourage long-term contracts based on such indices.

    "The initial driver behind it was to develop a mechanism for shippers and carriers to use in negotiation of longer-term contracts that might include specific triggers or bands within which rates could fluctuate based on historic revenue trends," TSA administrator Brian Conrad told London's Containerisation International.

    FMC chief of staff Lowry Crook, heads the working group, said service contracts reference freight indices such as the China Containerised Freight Index, the Shanghai Containerised Freight Index, the Drewry Freight Insight Index, and the Transpacific Stabilisation Agreement Index, reported American Shipper.

    "Until recently, the TSA index was not published, and access to historical rates for other index was limited to those who paid significant subscription fees," said Mr Crook.

    The working group questioned whether the requirement for the index to be widely published "is unnecessarily restrictive, and whether its scope is required by the Shipping Act."

(resource:http://www.shippingonline.cn/news/newsList.asp?classname=News)