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Sustained volatility in the Asia-US cargo market has delayed development of TSA's annual service contracting program for 2012-13. As U.S. economic and retail indicators remain inconclusive, TSA lines are focusing in the short-term on recovering rising costs and reversing rate erosion seen in past months. In November 2011 TSA member carriers announced a guideline recommended increase in revenues of a minimum US$400 per 40-foot container, effective January 1, 2012, as an interim step prior to rolling out an annual service contracting program. The guideline applies to all shipments moving under individual carrier tariffs, as well as service contract cargo in all commodity segments where contract provisions permit. Rather than adopting a single formal guideline increase, lines will individually pursue various approaches to interim cost recovery and revenue restoration, whether in the form of across-the-board general rate increases, peak season surcharges or other mechanisms, depending on each carrier’s unique situation. In all cases, the objective is to meet expected cargo demand growth and begin reversing 2011 revenue losses resulting from slower than expected demand; ongoing market uncertainty; rising inland transport, cargo handling, equipment and other costs; and a downward spiral of tariff rates in Q1 2011 that spilled over into current 12-month service contracts. Lines will additionally review current rates and contracts to identify opportunities for raising the hardest-hit rates prior to January 1, 2012. A TSA 2012-13 service contract program is expected to be finalized at yearend or early in 2012. How Rate and Contract Guidelines are Developed Lines next take into account the anticipated relationship between available vessel/equipment supply and cargo demand for the coming year whether space and equipment availability will be tight or not, especially during peak shipping periods. More than 90% of total Asia-U.S. container traffic moves under such service contracts, although a small number of contracts may have different start dates and longer or shorter durations. Cargo that does not move under contract is covered under the publicly posted tariffs of the individual shipping lines. Most contracts involve a specified volume commitment in exchange for favorable service terms and price. Most contract negotiations begin in February and March, after carriers and their customers have had an opportunity to reassess market prospects following the traditional December-February slack season. A brief peak period appears in March and April, with back-to-school merchandise that will be sold during the summer. The primary peak season runs approximately from July through October, when holiday inventory is shipped, with carriers beginning to ramp up service levels during June. |
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