Risk management methods for the liner shipping industry : the response to customer service demands for simplified tariffs

The liner shipping industry has, through its anti-trust immunity, been able to set freight rates as a group. In order to minimize financial risk due to fluctuations in cost factors, the shipping lines have implemented surcharges that are added to the basic freight rate when there is an adverse change in a cost factor. There is pressure from shippers and shippers’ associations to eliminate these surcharges. In addition, there is the likelihood of increased competition in the liner industry should the anti-trust immunity granted to the liner industry (in trade routes to/from the U.S.) be eliminated. This study looks specifically at two of the major surcharges, the Bunker Adjustment Factor and the Currency Adjustment Factor, and offers alternatives to surcharges that will appeal to the shipper, while still offering the liner shipping operator the risk protection he desires.