[161211.EN.SEA] Drewry's Most Cited In FMC Filings of Index-linked Service Contracts

OF the 50 service contracts filed with the US Federal Maritime Commission (FMC), almost half are linked to Drewry indexes, attesting to the popularity of the Britain's Drewry Maritime Research container freight rates analysis, reports London's Containerisation International.

Said Drewry's Container Freight Rate Insight research chief Martin Dixon: "More and more retailers and manufacturers are coming to Drewry for advice on how to construct index-linked contracts. The commission's comments quash any impression that carriers will not sign index-linked contracts that reference spot rate indices."

The FMC is close to setting new rules that make it easier to draw up index-linked contracts. Under FMC regulations today, US service contracts can only reference outside terms, such as a rate in a freight index contained in a publication widely available to the public and well-known in the industry.

The proposed rule change would allow contracts to reference freight indices or other outside terms, so long as they are readily available to the parties and the FMC.

As the period for comment ended on November 22, FMC chief of staff Lowry Crook said the commission should be ready to promulgate a new rule by January.

"The proposed rule would give carriers and shippers the certainty and flexibility to use indices and derivatives in contracts as it removes legal uncertainties," he said.

"It's another tool they can use - a combination of using the index and being able to hedge risk. Most exports are low value, which means transportation is even more important. Any fluctuation in transportation really makes a difference in whether an exporter is profitable or not," Mr Crook said.

Source : HKSG, 15.12.11.