TRANSPORTATION NETWORK PROBLEM SOLVING

The Federal Maritime Commission was in the past, the repository government agency of common carrier rates until the Shipping Act of 1998 stopped the official requirement of filing freight rates. Moreover, the same Act mandates carriers to publish rates in private networks open to the public. However, these "open" networks charge a user time-fee for access to diversified number of rate publishing services,  resulting in more confusion to the public rather than clarity i.e., a manufacturer, exporter, trader, or consultant needing to quote the landed price of a product would need to subscribe to all publishing services and spend the time looking for a specific rate!

There are other choices of course and those are: Joining one of the carriers' conferences for access to their particular logistics network which makes users captive of a particular conference in addition of not being able to shop for rates from other conferences or independent carriers.

This business model addresses these issues making our international world rating system for all modes of transportation a very useful tool accessible to anyone without being captive to anyone service and at a reasonable access fee.

This is a highly competitive market and somewhat a monopoly at the same time. The large capital amount required for entry keeps the competition in check and national governments have to monitor rate setting practices to prevent unfair competition, therefore, it is against carrier’s interest to have rates open to the public for shopping.  National legislators require common schedule carriers to make rates available to the public in order to exploit a given route. Carriers however get around regulations by publishing rates in private networks they control in such a way that a user would need to pay for access to all of the existing networks in order to find a specific rate. Moreover, the rates are listed at the high end of the spectrum so that carriers can offer discounts to large brokers, and other third part service providers, while at the same the same, carriers can enter confidential service agreements with preferred customers. At the end of the day keeping rates away from shoppers is the name of the game.

So who needs to participate in such regressive system?

a)      Anybody in the world who needs to ship something needs to find the best rate for the landed price of a product in order to take part in international merchandise trade. Mainly, manufacturers, wholesalers, retailers and merchandise traders in general who have a need for competitive rates in order to participate in global trade. Whether bulk commodities, semi-manufactured products and consumer merchandise must have a choice for the best option in order to enter or stay in a particular international market.

b)      ) In this scenario, carriers of goods can manipulate the market to their advantage, specially, when a country does not have a merchant marine and must depend on foreign flag carriers that can co-join routes with other carriers and set prices at will as fewer choices are globalized. The World Bank and the International Monetary Fund follow these markets and report to national governments its findings so that better trade agreements can be negotiated among countries.

This asymmetry of international trade is also monitor by custom unions as each country has a Customs organization at the ports of entry or exit of imports and exports. This monitoring tool is as accurate as the information provided to Customs by the importing or exporting party. The issue comes down to the difference between free on board (FOB) and cost insurance-freight (CIF).  As a result, the variation in the cost of imported and exported merchandise at the port of entry or exit is the cost of transportation. However, declared value or merchandise for insurance or Customs can vary among individuals shipping the same or similar merchandise.

By calling freight forwarders, brokers, carriers, and more recently with the Internet many sites offer freight services but their model is to obtain shipping information from the user and then go shopping for a carrier that can provide such service after a fee has been added. Others work on commission with/or for brokers but this requires licensing from regulators which is a deterrent for many. In conclusion, obtaining independent freight rates for a given trade lane is the best option for the existing order where carriers can make or break a business deal or keep a party from entering the market.

Curiously enough commodity pricing is not set for the most, part at the origin, but in financial markets.

Selected samples:

Price Specifications Point

Crude Palm Oil Futures Bursa Malaysian                                                              

Peru Fish meal/pellets, 65% protein, CIF United Kingdom                                                                                          

United Kingdom ex-tanker prices, crude extra virgin olive oil,                                                  

Ground nuts 40/50 (40 to 50 count per ounce), in-shell, CIF Argentina                                                   

Rapeseed oil crude, fob Rotterdam                                                                                                                       

Lamb New Zealand, PL, frozen, wholesale price at Smithfield Market, London                                                 

Coffee, Sugar and Cocoa Exchange, New York Board of Trade.                                                   

EU import price, unpacked sugar, CIF European ports.                                                                                   

International Coffee Organization, Other Mild Arabicas New York cash price.                                                   

Cotton Middling 1-3/32 inch staple, Liverpool Index "A" Cts/lb five of fourteen styles, CIF Liverpool

Singapore Commodity Exchange, No. 3 Rubber Smoked Sheets.                                                                                              

London Metal Exchange, grade A cathodes, spot price, CIF European ports                                                         

London Metal Exchange, standard grade, spot price, minimum purity 99.5 percent, CIF U.K. ports                           

China import Iron Ore Fines 62% FE spot CFR Tianjin port;                                                           

Malaysian, straits, minimum 99.85 percent purity, Kuala Lumpur Tin Market                                                      

London Metal Exchange, melting grade, spot price, CIF Northern European ports                                                            

London Metal Exchange, high grade 98 percent pure, spot price, CIF U.K.                                                            

London Metal Exchange, 99.97 percent pure, spot price, CIF European ports.                                                     

Metal Bulletin Nuexco Exchange Uranium (U3O8 restricted) price.