The Formation of Shipping Conference and Rise of Shipping Alliance

Abstract

In order to encourage competition in international shipping and growth of U.S. exports, the Senate and House of Representatives of the U.S.A. in Congress assembled in 1988. In the assembly, the Shipping Act of 1984 was amended and instead, the OSRA (Ocean Shipping Reform Act) of 1998 which modernizes and deregulates the international ocean shipping business was enacted. The biggest change is shippers are allowed to sign the Service Contract (S/C) directly with individual carrier (but not the alliance). After the implementation of OSRA of 1998, there has been drastic increase in the number of S/Cs, in addition, the volume of cargo moving under service contracts has been ever increased. For this, the existence of shipping conference became meaningless and then totally appear and out of the market. OSRA of 1998 are regarded as the catalyst contributing to the restructuring of the liner shipping industry. It has led to the formation of shipping alliance in terms of vessel-sharing and space charters. The activities of shipping alliances between liner carriers have been increasing intensively since the last two decades, satiating with a whole new requirement of shippers stemmed from the industrial globalization.